Charitable Trusts and Heart IconsGiving back can be part of a solid estate planning strategy since creating a charitable trust can reduce your estate taxes, similar to the way giving one-time donations to charitable organizations earns you the charitable deduction to reduce income taxes.

Types of Charitable Trusts

Charitable trusts are typically formed with highly appreciated assets such as real estate or stock. There are two main types of charitable trusts that can be used to support your favorite organization. The following is a brief overview:

  • Charitable lead trust. With a charitable lead trust, you make a series of payments to the organization of your choice. When the payments are completed, the remaining assets in the trust either revert back to you or are given to your heirs. You have control of the assets in the trust throughout the trust’s lifetime.
  • Charitable remainder trust. A charitable remainder trust benefits your spouse, child, grandchild, or other heirs for the time period you have selected. Most often, this is until the beneficiary passes away. Then, whatever is left in the trust goes to the charity of your choice. Alternatively, the trust can list you as the beneficiary and the remainder will be donated to charity after you pass away. This reduces your current income taxes as well as the estate taxes after your death.

Charitable lead trusts and charitable remainder trusts can be further classified according to how the payments are determined. When a charitable trust provides a fixed income, it is referred to as an annuity trust. When the trust pays a percentage of trust assets, it is known as a unitrust.

Contact Us Today

Legacy Lawyers is committed to providing clients with peace of mind as they plan for the future. There are no boilerplate estate planning documents at our firm—we create custom plans for each and every client. To learn more about the different ways you can incorporate charitable giving into your estate plan, call our office in Wilmington or fill out the contact form on this page to schedule a free 15-minute consultation with one of our estate planning attorneys.

 

John J. Peck
Wilmington North Carolina Elder Law & Estate Planning Attorney
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