Making Sense of Charitable Trusts
Sally has decided that she wants to establish a fund
at the Foundation, and she wants to use a charitable
trust to make the gift. She has heard about charitable trusts, and knows a bit
about how they can be used as an estate planning tool.
She knows that there are different types of trusts, such
as:
To decide which type of charitable trust is right
for her, Sally needs to decide whether she wants to
make a gift that will provide her with lifetime
income, or a gift that will help her pass assets on
to her children.
Charitable Remainder
Trusts
Charitable Remainder Annuity Trusts
If Sally wants to maximize the income available
to her during her lifetime, a charitable remainder
trust may be the best option. Benefits of charitable
remainder trusts may include:
- Trust will create a fund to benefit the
causes Sally cares most about
- Annual income for Sally or her designated
beneficiary (a fixed dollar amount), which may
be higher than the current income from the
property to be gifted to the Foundation
- Immediate income tax deduction
- Future estate tax savings
- Elimination of capital gains tax on the
appreciated property gifted to the Foundation
Charitable Remainder Unitrusts
Sally could also choose a charitable
remainder unitrust to provide income during her
lifetime. Benefits of the charitable remainder
unitrust may include:
- Trust will create a fund to benefit the
causes Sally cares most about
- Annual income for Sally or her
designated beneficiary (a specific
percentage of the year-ending market value
of the property in trust each year)
- Immediate income tax deduction
- Future estate tax savings
- Elimination of capital gains tax on the
appreciated property gifted to the
Foundation
Charitable Lead Trusts
To help pass along assets to her
children, Sally may choose a charitable lead
trust. The charitable lead trust would allow
Sally to place assets in trust. Income from
the trust would then go to the Foundation,
and the assets would revert to Sally's
chosen beneficiary(ies) after her death.
Advantages of a charitable lead trust may
include:
- Income from trust will create a fund
to benefit the causes Sally cares most
about
- Transfer of significant assets with
little or no transfer tax cost
- Federal gift tax deduction
- Future estate tax savings
The Foundation can assist Sally and
her attorney in creating a gift that
will meet her needs, whether it be
through a CRUT, NICRUT, NIMCRUT,
FLIPCRUT, CRAT or a CLT (and the staff
can help Sally understand what each of
these abbreviations stands for)!
For more information about Charitable
Trusts, please
contact the First Community Foundation
of Pennsylvania.
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