Wednesday, 26 August 2020 06:59

What are Charitable Trusts?

Charitable trusts are wealth planning vehicles with advantageous tax benefits for philanthropic families or individuals who wish to donate to charitable organizations.

There are two main forms of charitable trusts: a charitable remainder trust (CRT) and a charitable lead trust (CLT). Each charitable trust type serves a separate purpose and differs in the timing of when charitable and non-charitable beneficiaries will receive distributions.

Charitable Remainder Trust (CRT)

  • Provides a designated amount  to the grantor (the trust creator) or non-charitable beneficiary(ies) for a specified term
  • The balance of the trust passes to a charitable organization(s) after expiration of the specified term
  • May lower the income tax liability of the grantor
  • Reduces the grantor’s taxable estate at death

Charitable Lead Trust (CLT)

  • Provides a designated amount to a charitable organization(s) for a specified term
  • The balance of the trust passes to non-charitable beneficiaries at the after expiration of the specified term
  • May lower the income tax liability of the grantor
  • Reduces the grantor’s taxable estate at death

Next Steps

Charitable trusts can be highly complex wealth-transfer vehicles. For additional information about how these types of trusts might help you achieve your philanthropic and estate planning goals, please contact your estate planning attorney.

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