If you are in the fortunate position of being able to gift funds to causes and organizations that you care about, it is important to make the most out of what you have to give. Minimizing the tax liability associated with charitable gifts is one way to make sure that your funds go farther than they otherwise might.
One of the best ways to minimize your charitable giving tax liability and to more easily manage your charitable gifting strategy is to establish a charitable giving trust. Taking this proactive step will help to streamline your charitable giving well into the future and can help you to maximize every dollar that you choose to donate.
Charitable Trust Basics
When you establish a charitable trust, you’ll need to designate a trustee to manage the assets held within that trust. The trustee will be legally bound to respect the terms of the trust as established by you and your attorney.
As an experienced Roseville, CA trust attorney – including those who practice at Yee Law Group, PC – can explain in greater detail, there are two primary kinds of trusts established for the purpose of charitable giving. First, there are charitable lead trusts. These legal and financial tools allow a trustee to distribute income generated by the trust to charitable organizations designated as beneficiaries over a set number of years. Once that time period has expired, any remaining assets in the trust are distributed to non-charitable beneficiaries, which may include the children and grandchildren of the individual who established the trust.
Second, there are charitable remainder trusts, which function in the opposite way that charitable lead trusts do. Trust assets are distributed to non-charity beneficiaries first. Then, when the trust is being dissolved, the remaining assets are distributed to a designated charity.
Charitable trusts are generally irrevocable. This means that once you’ve established the terms of a charitable trust, named beneficiaries and a trustee, and the trust has begun functioning, you likely won’t be able to alter much—if anything—about the operations of the trust. This means that you’ll need to be very thoughtful when working with an attorney to establish the trust in the first place.
It has often been said that knowledge is power. When it comes to charitable giving and charitable trusts, being proactively thoughtful is power. An experienced estate planning lawyer can help you to set up a charitable trust in thoughtful ways.