You may have a charity that you donate to regularly. This charity may help many people by offering services, researching critical issues or raising awareness of public concerns. Your donations matter, and you can keep donating to your charity after you pass away by creating a charitable trust.
A charitable trust can help fund a charity for many generations. Here is what you should know:
How are trust funds donated to charities?
A charitable trust allows you to transfer money to a trustee. The trustee can be responsible for distributing trust funds to a charity, nonprofit organization or private foundation during your life or after you pass away. There are two common types of charitable trusts you may consider drafting:
- Charitable lead trust (CLT): A charitable lead trust donates to a charity or organization for a predetermined number of years. The trust can pay a charity a fixed amount or a fixed percentage of the trust every year. Once a charity receives its final donation after a set period, the remaining funds in the trust can be distributed to a beneficiary. Many people use a CLT for tax advantages.
- Charitable remainder trust (CRT): A charitable remainder trust allows a donor to donate funds to the trust. The donor also receives an income stream from the trust for a predetermined number of years. After the set period is over, the remaining assets are transferred to a charity.
There are many considerations to make when drafting a charitable trust. You can reach out for professional legal guidance to learn more about your trust options.