A charitable trust is a trust established to hold a large sum of money that is set aside to be donated to charity posthumously. These trusts usually hold several hundred thousand or millions of dollars and have a double benefit to them when it comes to taxes. The trust lawyer near me brags that not only can you get an income tax deduction for setting up a charitable trust during your lifetime, but you also benefit from the estate tax reduction after death.
Wealthy individuals often set up charitable trusts as a way to utilize the tremendous tax benefits as well as benefiting from ownership of the trust for years. One type of charitable trust that is most often set up for wealth clients by a trust lawyer near me is a charitable remainder unitrust (CRUT). A CRUT enables a non-charitable beneficiary, such as a child or spouse, to draw income off the trust for a term not to exceed 20 years. When the term is over, the remaining amount left in the trust will be delivered to the charity named when the CRUT was established.
A charitable remainder annuity trust (CRAT) is similar; however, rather than a percentage of the annual distribution amount being given to a non-charitable entity, the amount is a fixed dollar amount. CRATs are often chosen over CRUTs because the dollar amount paid to the beneficiary is stable every year regardless of the trust performance. CRAT payment can fluctuate drastically from year to year and be unreliable as a source of income.
A trust lawyer near me always recommends funding charitable trusts by adding a property that has significantly appreciated, such as stock that maintains a low basis. This way of funding helps you to avoid capital gain taxes as well by placing stock into trusts rather than selling. However, the heir of the estate and trust will have to pay taxes on the distributions made to them when the time comes.
If you’re looking for a trust lawyer to set up a charitable trust for your estate, contact The Law Office of Kimberly K. Muenter, P.A. at 941-254-2842.