Estate planning attorneys often hear from clients who want some of their assets to go to charity. While simply signing away money on a will may sound easy and appealing, creating a charitable trust may provide you with benefits while you’re still alive.
In California, there are two main types of charitable trusts:
- The charitable lead trust
- The charitable remainder trust
The Charitable Lead Trust
When you establish a charitable lead trust, you must designate a beneficiary organization or recipient. Once your charitable lead trust has been created, your assets, their value, and any prospective dividends may be used to benefit the charity.
If you create a charitable lead trust, you can designate certain return terms. For instance, you might specify 15% of trust assets be paid out to a charity for a set number of years, or the lead period, after which the remainder passes on to your children or other beneficiaries.
The Charitable Remainder Trust
If you set up a charitable remainder trust, you will also have to transfer property or assets into a trust account. You will designate trustees—such as yourself, a spouse, or other loved ones—to manage the trust.
Once the charitable remainder trust has been established, you can sell off the assets and reinvest the proceeds. You are allowed to withdraw and use a portion of the proceeds for your personal needs while you’re still alive. When you die, the trust’s remaining assets will pass to your charitable beneficiary.
You may also name a non-charitable beneficiary to receive a portion of the trust proceeds. Once your beneficiary dies, their stake and proceeds will be passed on to the charitable recipient.
Determine What’s Best for Your Estate
Charitable trusts can provide grantors with opportunities to give to charities while saving big on taxes while they’re still alive. However, determining which kind of trust is best for your estate can be a daunting and difficult task. If you want to give back to your community and ensure your lasting legacy, send us a message, or call us today.
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