Law Offices of Roshni T. Desai
Long-term Planning For Orange County

What is a charitable trust?

If you are a reasonably wealthy California resident who desires to make a substantial contribution to your favorite charity, you may wish to consider creating a charitable trust. As Fidelity Investments explains, there are two different types of charitable trusts: charitable remainder trusts and charitable lead trusts. Both types split the assets you contribute between the charity and a noncharitable beneficiary of your choice.

A charitable trust can give you great flexibility and control over the assets you contribute to it. At the same time, it can help you fulfill your goals for philanthropy, estate planning and tax management. Which type of charitable trust is right for you depends on your estate planning and wealth preservation goals, as well as on what kind(s) of assets you want to donate.

Charitable lead trusts

With a charitable lead trust, your charity receives the interest income from your donated assets for a specific period of time. This could be a designated period of years or during your life or the life of your chosen individual beneficiary. At the end of the term, the trust terminates and your chosen individual beneficiary, or his or her estate, receives the remaining assets.

Charitable remainder trusts

With a charitable remainder trust, you donate assets to a trust for a specific period of time. This could be for up to 20 years or during your lifetime or the lifetime of your chosen noncharitable beneficiary. The trust makes an annual payout to you or your chosen noncharitable beneficiary. At the end of the trust period, the remaining assets, and the value of their appreciation, goes to your chosen charity.

This information is only intended to educate. You should not interpret it as legal advice.

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