Should Charitable Trusts Be Part of My Estate Plan?

 Posted on June 11, 2021 in Estate Planning

By:  Attorney Denis J. Regan and Paralegal Steven M. Lant

During the estate planning process, you will want to make sure your family members will have the resources they need after you are gone, and you can also make sure your wishes will be followed throughout the rest of your life. However, in the event you have substantial assets beyond the level necessary to support or assist children, you may want to consider the legacy you leave behind from a charitable perspective.  Incorporating charitable giving into your estate plan is a great way of supporting causes you believe in and using your financial resources in a positive way.  The most common method is to provide specific bequests to designated charities in your will/revocable trust.  For charitably inclined persons with substantial resources, charitable trusts can offer a number of benefits for the organizations worthy of support, as well as you and your family members.

Types of Charitable Trusts

When you create a trust, you will place certain assets in the control of a trustee and provide instructions for when and how the assets should be distributed to your beneficiaries. This will protect your assets and ensure that they will be used properly. With a charitable trust, you can name one or more charitable organizations as a beneficiary, and assets may be donated in a lump sum or over time. Unlike living trusts, charitable trusts are usually irrevocable, and once they are created, they cannot be modified.

Charitable trusts often fall into three categories:

• Charitable lead trusts – In this situation, a sum of money is contributed to the charitable trust with the income or percentage of assets distributed annually to the charity(ies).  Upon the death of the Donor(s) or expiration of a set time, the remaining assets are then distributed to individual beneficiaries, such as family members.

• Charitable remainder trusts - This type of trust will make distributions back to Donors based upon an annual percentage of the principal gift amount for a certain amount of time, after which the remaining donation will be donated to charity often upon death. For example, you could receive income from the trust (or a specific percentage of Trust assets) throughout the rest of your lifetime, ensuring that you will have the financial resources you need while designating the assets that are left over toward a good cause.

• Charitable Foundation – A charitable trust or foundation is a tax exempt entity set up by individuals for specific charitable purposes that benefit the community (i.e., education, poverty alleviation, support of the arts, medical or disease organizations, etc.) as chosen by the Donor(s).  Donor(s) may subsequently make tax deductible gifts to the organization, which will take possession of the donated funds and gradually support the charitable organizations or causes identified in the initial foundation documents.  The Donor(s) can make donations to the foundation during their lifetime and/or upon death.  This can be excellent vehicle to promote good causes and also a vehicle to involve children with the opportunity for involvement with the foundation further after death of the Donor(s).

In addition to supporting organizations that need financial help, a charitable trust can provide tax and other benefits for you and your family. Placing assets in a trust and donating them to charity may help you reduce estate taxes, minimize capital gains taxes, and benefit from income tax deductions for charitable donations. 

Contact Our Milwaukee Charitable Trust Attorneys

If you are looking to make the most of your assets, the attorneys of Gimbel, Reilly, Guerin & Brown, LLP can advise you of the best ways to use charitable trusts and other estate planning tools. We will help you create a comprehensive estate plan that will protect your assets and make sure your wishes are carried out correctly. Contact our Milwaukee estate planning lawyers today by calling 414-271-1440.

Sources:

https://www.westernsouthern.com/learn/financial-education/what-is-a-charitable-trust

https://www.bbvausa.com/wealth/wealth-strategies/family-wealth/pros-and-cons-of-a-charitable-trust.html

https://www.policygenius.com/trusts/how-to-start-a-charitable-trust/