What kinds of trusts give money to charity?

On Behalf of | Aug 9, 2023 | Wills, Trusts, Estates, & Taxes

Putting money into a trust might be your preferred method of giving family members an inheritance or even a steady income stream during your lifetime. A trust can also be useful if you wish to leave a large amount to a charity.

It is possible to create a trust for a particular purpose, such as a charitable trust that disperses money to your desired charitable organization. These trusts can also help your family in the process.

Types of charitable trusts

U.S. News and World Report explains that charitable trusts generally come in two forms. A charitable remainder trust allows the trust grantor to first pay an income stream to trust beneficiaries. This may happen as long as the beneficiaries are alive or for a set time period. Afterward, the trust will pay out to a charity.

By contrast, a charitable lead trust pays the charity first. Following this, the trust will provide income or other benefits to the remaining beneficiaries.

Pros and cons of charitable trusts

In addition to leaving money to charity, a charitable trust could help you avoid taxation on assets you place into the trust. You can also reduce the size of your estate and minimize taxes on it.

Charitable trusts do have possible downsides. They involve costs to set up and maintain. Also, charitable trusts are usually irrevocable, so you will lose control of the money you place into the trust. If you need money from the trust later, you will not be able to access it.

Establishing a charitable trust requires some careful planning. Still, if you have a surplus of savings that you want to disperse to your favorite cause, a charitable trust can be worth it.