Charitable Trusts: Social and Estate Planning Benefits
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Find the right charitable trust to meet your philanthropic and financial goals.

A charitable trust can be an ideal financial vehicle to help fulfill your philanthropic goals as well as your wealth management ones. In other words, you can reap both social and financial benefits in exchange for your goodwill, says Bill Saville, Senior Vice President and Trust Advisor for Regions Private Wealth Management in Atlanta, Georgia.

When you establish a charitable trust, your wealth isn’t the only valuable asset you leave behind. “Depending on how it is set up, a charitable trust can last long after the lifetime of the original donors, thereby leaving a legacy,” Saville says.

Here’s what you should know about charitable trusts before pursuing one.

What Is a Charitable Trust?

There are two main types of charitable trusts that you might consider:

  1. Charitable Remainder Trust (CRT): Involves transferring assets to the trust and receiving a set percentage or fixed amount of income during a particular period of time. Then, a charity you’ve selected receives the remainder upon that period passing (e.g., upon your death, upon the death of other named individuals, or the end of the trust term, depending on how the trust is set up).
  2. Charitable Lead Trust (CLT): The opposite of a CRT in terms of timing, your chosen charity receives a percentage or fixed amount of income during the particular period of time (e.g., your lifetime, depending on how the trust is set up), and your beneficiaries receive the remainder of the assets at the end of the trust term.

Either way, your charitable contribution will be remembered. “Recognition is usually given to the donor, even if the gift may not materialize until much later,” Saville says.

Learn more about the two types of charitable trusts in this tip sheet.

What Are the Estate Planning and Tax Benefits of Charitable Trusts?

Charitable trusts are popular estate planning and tax-reduction tools, depending on the trust type. According to Saville, some of the benefits for charitable trusts include the following:

Charitable Remainder Trusts:

  • Converts an appreciated asset into income for life or for a fixed term no longer than 20 years
  • Offers an immediate charitable income tax deduction, which can be carried over for five years
  • Avoids capital gains tax when property within the trust is sold
  • Reduces or eliminates estate taxes
  • Provides protection from creditors for gifted assets

Charitable Lead Trusts:

  • Reduces or eliminates gift and estate taxes
  • May offer future gift tax reductions (known as an estate freezing technique)
  • Offers generation-skipping tax benefits
  • Allows you to postpone the noncharitable beneficiary’s receipt of the trust assets
  • Has no maximum number of years it can operate for gift or estate transfer tax purposes
  • May offer minimal or no transfer taxes

Learn more about trends in charitable trusts to help determine if one could help you meet your financial and personal goals.

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This information is general in nature and is provided for educational purposes only. Regions makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented. Information provided and statements made by employees of Regions should not be relied on or interpreted as accounting, financial planning, investment, legal, or tax advice. Regions encourages you to consult a professional for advice applicable to your specific situation.