If you have a charity that you feel passionate about giving to, it is natural to wonder if you can leave money to that organization following your death. Still, you also have your children and possibly other relatives in mind to inherit from you. A trust can help you accomplish both of these goals.
However, you might feel uneasy about giving to both your family and your charity at the same time, particularly if you feel your relatives deserve their inheritance as soon as possible. Fortunately, it is possible to create a trust to prioritize your giving, and even have it function while you are still alive.
Using a charitable remainder trust
With a charitable remainder trust, you can pay an income stream to your designated beneficiaries for a period of time. This interval could be for the life of the beneficiaries or a set number of years. After the period ends, the remaining assets in the trust go to your chosen charity.
The beneficiaries receive regular payouts from the trust, which can be a percentage of the assets or a fixed amount. You receive an upfront charitable tax deduction when you fund the trust based on the expected amount the charity will ultimately receive. This deduction provides tax savings during your lifetime.
Using a charitable lead trust
If you feel your heirs can wait for their inheritance, you might opt for a charitable lead trust. With this type of trust, the charity receives the income stream payments for a set period of time. Afterward, the remaining assets pass to your designated beneficiaries.
You do not receive an upfront charitable deduction when funding this trust. However, any assets that go to your beneficiaries are removed from your taxable estate. This can provide significant estate tax savings if your estate exceeds exemption amounts.
Charitable trusts provide unique ways to support causes important to you while still benefiting your relatives financially. Since the type of trust you use makes a difference in the timing of payouts and potential tax benefits, you should consider your priorities carefully before composing a trust.
