There are multiple categories of charitable trusts. In general, charitable trusts are “split interest” vehicles that allow for a partial tax deduction on assets donated to the trust. Donated assets can be cash, real estate, stock, or other property. You or someone else may receive an income stream from the trust for a period of time with a qualified charity receiving funds also. Below is high-level information on various charitable trusts.
- Charitable Remainder Annuity Trust – This trust involves a fixed income payment (annuity payment) each year to a chosen non-charitable beneficiary. No additional contributions are allowed. After a period of years, such as 20 years or a beneficiary’s lifetime, the remainder of the trust passes to charity.
- Charitable Remainder Unitrust – This trust involves a fixed percentage of income to a non-charitable beneficiary each year. The income can vary depending on the value of the trust year-to-year. Additional contributions to the trust are allowed. After a period of years, such as 20 years or a beneficiary’s lifetime, the remainder of the trust passes to charity.
- Charitable Lead Trust – This trust involves an income stream to a charity for a period of years. After this period has passed, the remaining assets in the trust are distributed to non-charitable beneficiaries, such as children. Depending on the structure, the donor may use this type of trust for income tax or estate tax reasons.
These trust strategies can be complex, so please speak with your estate attorney, CPA or financial planner regarding how TFS may play a role in your overall estate and philanthropy planning.
Please speak with a tax, legal or financial professional before making any changes to your personal situation. This information is being provided as informational material and should not be construed as a recommendation or advice.