There are several types of trusts, some of which designate charities as beneficiaries. Two of these are the Charitable Remainder Trust and the Charitable Lead Trust.
These trusts are set up to help charities and also minimize estate taxes. Depending on how they’re structured, they can benefit both the charity and other beneficiaries (such as children).
In a Charitable Remainder trust for example, the charity receives the property, but the person who donated the item will continue to use and receive profits from it. Upon the person’s death, instead of the donator receiving income from it, the money goes to the beneficiaries. It’s a way of avoiding estate taxes as the person who donated it doesn’t actually own it – the charity does.
A Charitable Lead trust on the other hand, donates the income to charity. The actual asset generating the income is given to beneficiaries, not the charity. Once again, estate taxes are reduced because the property is not part of the estate upon death – it belongs to beneficiaries.
Charitable Remainder trusts and the Charitable Lead trusts benefit all parties involved. Working out your preferred type of trust is helped no end if you have a good estate planning attorney on your side.
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