Why Would I Need a Charitable Trust?

Why Would I Need a Charitable Trust?

Between the recent holidays and the upcoming tax season, you may have been thinking charitably these last few months. And you probably already know donating to an organization you care about can guarantee a nice tax break, depending on a number of other factors.

A charitable trust can also be used to make donations and realize tax savings for an estate.

For the record, only a person with large charitable intent needs a charitable trust. Don’t bother if you’re just going to give a few small gifts to charity in search of a small tax break. However, if you have large charitable intent, there are two particular charitable trusts designed to benefit charities and return a tax benefit to the donor.

Charitable remainder (CRT) and charitable lead trusts (CLT) are irrevocable split-interest trusts with noncharitable and charitable beneficiaries. These trusts can be created during life or upon death.

There are a few differences in these two types. The CRT has non-charitable lead (lifetime or term of years) interests followed by remainder interests passing to or for the benefit of charitable organizations. In comparison, a CLT has charitable lead (lifetime or term of years or both) interests followed by remainder interests passing to non-charitable beneficiaries.

A CRT and CLT can help clients do two things: take care of their family and make valuable contributions to charitable organizations. A client must have a “charitable intent” for these trusts to fulfill their estate planning objectives.

Without a charitable intent, the client and his or her family may not be happy with the results. However, when the client is charitably inclined and when structured properly, these split-interest trusts can also provide valuable income, gift, and/or estate tax benefits. That’s a win-win-win!

Talk with your accountant, attorney and family to determine if these are right for you.

If you’ve never thought about giving to charity, now’s the time to consider! Think about leaving something to your church or a cause you care about. Even a small percentage can make a big difference.