Charitable trusts allow individuals to support a good cause while also managing personal or family wealth. Two of the most common types are charitable remainder trusts and charitable lead trusts.
Each trust serves a different purpose and can be used in different situations. Here are some key points to remember.
What is a charitable remainder trust?
A charitable remainder trust (CRT) allows a person to receive income from the trust for a period of time. After that, the remaining assets go to a charity. The trust can pay income for a fixed number of years or for the rest of the person’s life. The amount received each year can be either a fixed amount or a set percentage of the trust’s value.
This type of trust might be helpful for someone who wants regular income now but also wants to support a charity later. It can also help reduce taxes on appreciated assets, such as stocks or real estate.
What is a charitable lead trust?
A charitable lead trust (CLT) works in the opposite way. The charity receives money or assets from the trust for a set number of years or for the lifetime of the person who establishes the trust. When that time is reached, the remaining assets go to the person’s chosen beneficiaries, such as family members.
This option may appeal to people who want to support a charity during their lifetime while passing assets on to their heirs later. It can also help reduce estate or gift taxes.
Charitable trusts can be a useful tool for those who want to give back while also planning for the future. The right choice depends on the person’s goals, whether they want to provide income to themselves or to a charity first and how they want their assets handled over time. To explore your options in more detail, you should seek legal guidance.