3 Questions About Charitable Trusts

Question 1: Don’t I need a lot of money to set up a charitable trust?

You probably don’t need as much money as you think you do. A lot of people can set up a charitable trust to take advantages of the significant tax benefits they offer. Charitable trusts are best set up for people who want to give to charitable causes, such as education, the arts or other causes that will need regular support. People who want to give to individual charities probably don’t need to create a charitable trust.

Question 2: How does a charitable trust work?

Most charitable trusts begin when the person making it transfers money to the trust for a specified period of time. That money then gets used to pay for charitable donations in accordance with the trust terms. The trust money typically gets donated in either a specified amount given out each year, or as a percentage of the trust value given out each year.

Question 3: Are there different types of charitable trusts?

Yes. There are two basic types of charitable trusts: a remainder trust and a lead trust. With the remainder trust, a person creating the trust transfers property to it for a specified period of time. At the end of that time the donated property, as well as any interest, becomes trust property. With a lead trust, the property donated remains under the control of the donor until the trust expires. Your estate planning attorney can give you more information about how charitable trusts work and the different types.