You might think of a philanthropist as an extremely wealthy individual who holds a great deal of power, but that's not necessarily true. Anyone can contribute philanthropically to causes they care about, and that includes you. One great method of giving back is to establish a charitable trust in your estate plan.
A charitable trust is a type of trust that is created to support a charitable cause or a specific charity. It is similar to other trusts in that it distributes money or property to a beneficiary. In this case, the beneficiary could be one of your favorite charities.
The advantages of a charitable trust
There are many positive factors that may encourage you to set up a charitable trust, such as:
- The joy of giving: One of the most rewarding aspects of a charitable trust is that it can help support the causes that are important to you.
- Tax benefits: Once you set up the trust, you can also count it as an income tax deduction and stretch it over five years for the value of your contribution to charity. Additionally, the property you donate will not be subject to estate taxes.
- Diversified investments: If you have property that isn't generating income, you can transfer it into a charitable trust, sell it, and then reinvest the cash into other opportunities that produce income, all without incurring capital gains tax.
- Sharing is caring: By establishing a charitable trust, you can also set an example in your community on the importance of giving to charity.
One possible drawback of a charitable trust is that once established, it can't be terminated. This means that before making one, it is very important to be absolutely certain about your decision. If you think you might want to include such a trust in your estate plan, contact an experienced estate planning attorney.