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Can a trust help you pass on money to a charity?

On Behalf of | Nov 29, 2021 | Estate Planning

If you would like to leave at least some of your assets to a charity, then you may want to consider using a charitable lead trust or charitable remainder trust to do so. Making charitable donations is a great way to help reduce the value of your estate and minimize the risk of having to pay the estate tax on a high-valued estate.

The two kinds of charitable trusts, charitable lead trusts and charitable remainder trusts, allow you to pass on your assets to a charity. If you don’t have children or want to give assets to the community instead of family, this could be a good choice for you.

Charitable lead trusts

With the charitable lead trust, your assets will be stored in the trust until they can be passed on to a tax-exempt charity. When you donate in this way, you lower the total value of your estate and reduce your taxes.

The assets in a charitable lead trust pass on to beneficiaries at your death or once the predetermined length of time has passed to trigger that transfer.

Charitable remainder trusts

Unlike charitable lead trusts, charitable remainder trusts let you pass on your appreciating assets into an irrevocable trust. When you do this, you maintain the right to continue earning from the asset. For example, you could include a stock that will grow over the years to come.

At the time of your death, the investment income will pass on to a charity. This helps you by avoiding capital gains taxes on the increased value of the asset. Your estate’s value will also be lowered, and you’ll get a tax deduction for your estate.

Both of these kinds of charitable trusts let you pass on assets and money to the charities that you believe in. If you would like to assign money or assets to a charity, it’s a good idea to get in touch with that charity to be sure of how it would like to be named. Then, you can include the charity in your estate plan, so it gets the assets you want it to have.