CHARITABLE TRUST
Just like a revocable living trust can be used to benefit you during your lifetime and those you choose upon your death, a charitable trust can also be a great tool for benefiting a charity.
CHARITABLE REMAINDER TRUST (CRT)
This is a tax-exempt irrevocable trust designed to reduce both your taxable income now and estate taxes when you die by removing cash or property from your ownership. As part of this strategy, you will fund the trust with property that has grown in value over the years (like stocks or real estate). Once funded into the trust, the property is sold, and the money is invested in a way that will produce a stream of income. Because the CRT is selling the property, there will be no capital gains tax on the sale of stocks or real estate. Then, you will receive either a set amount of money per year or a fixed percentage of the value of the trust (depending on how the trust is worded) for a term of years. When the term is over, the remaining amount in the trust will be distributed to the charity you have chosen. The term of the trust can be for a set number of years or for your lifetime. Additionally, you will receive an immediate charitable income tax deduction based upon the value that will go to the charity.
CHARITABLE LEAD TRUST (CLT)
Like a CRT, you are funding the trust with property that has grown in value, but in a CLT, the charity receives the income stream for a term of years. Once the term has passed, the individuals you have named in the trust agreement will receive the remainder. This can be an excellent way to benefit a charity but still provide for your loved ones. Also, you will receive a deduction for the value of the charitable gift that is made. This will offset the gift or estate tax that may be owed when the remaining amount is given to your beneficiaries.