People often have causes and charities that they support when they’re alive. Many may not realize that the support they provide doesn’t have to stop when they pass away. It’s possible to support favorite charities and causes through estate planning.
Charitable trusts are options for continuing support. There are two types of charitable trusts to consider if you’re interested in providing this type of support.
Types of charitable trusts
Charitable remainder trusts support loved ones first and then charities. Charitable lead trusts are the opposite – they support the charities first and then loved ones after. In both cases, term limits apply to how long the first beneficiary of the trust will receive distributions from the trust. Once that term expires, the second group of beneficiaries receives their portion of the trust.
Determining which of these trusts will work for a specific situation requires thinking about the overall goal of the trust, considering estate or gift taxes and looking into how the trust can do the most good after you pass away.
Charitable trusts can be challenging to set up, partially because they’re subject to strict legal standards. Failing to meet the requirements could mean that some benefits of the trust, such as tax effects, don’t function as intended.
A charitable trust may not be appropriate for every estate plan, but it’s something to consider if you plan to support a charity with more than a single donation. Understanding the specifics of these trusts, such as the costs, ongoing need for management and continued legal compliance, is important. Because of all this, it might be best to work with someone familiar with these matters.