Setting up a charitable trust is a great way to support the charities you are passionate about while also lowering your tax burden. If done properly, you can also provide for your family or other beneficiaries at the same time. In the U.S., there are generally two types of charitable trusts, which you should discuss with a qualified tax attorney to find out which one is right for you.
Charitable Lead Trusts
A charitable lead trust is a type of “split interest” trust, meaning that you leave assets both to a charity and to a non-charity beneficiary, such as your family members. However, the charity receives income from the trust first. The length of time for this type of dividend varies. For example, the charity can receive income for the entirety of your life or for a certain number of years. After that point in time, the remainder of the trust income goes to your non-charity beneficiaries.
Charitable Remainder Trust
This is another split-interest trust, to which you donate certain assets. However, the trust makes annual payments to either you or your non-charity beneficiary for a certain amount of time, such as the length of your beneficiary’s life. After that point, the remainder of your trust assets will pass to the charity.
Advantages of Creating a Charitable Trust
Charitable trusts are popular for a variety of reasons, but one important reason is that they can save you money by lowering your tax burden. For example, you can fund your trust with appreciated assets (such as stocks) and then sell those assets within the trust for full fair market value. Because the property is within the trust, you don’t have to pay capital gains taxes.
You can also lower your tax burden in other ways, depending on the charitable trust you choose:
- With a charitable remainder trust, you might be able to claim an immediate partial income tax deduction for the value of the gift you are making to the charity.
- With a charitable lead trust, you might be able to claim a tax deduction for the year you fund it.
- If you fund your charitable trust during your life, you can reduce your estate taxes.
Tax law is complicated, and everyone’s situation is different, so it is key to meet with a tax attorney early on to decide which charitable trust will benefit you the most. A skilled tax lawyer, like Jeff Cohen, will review your goals and find the best vehicle for you.
Contact a Georgia Tax Attorney Today
Preserving income for your family doesn’t have to come at the expense of giving to charity. If you’re interested in creating a charitable trust, you should meet with an experienced tax attorney to review the best options for you. Jeff Cohen, Attorney at Law, has 30 years of experience advising clients on how to preserve their wealth and lower their overall tax burdens. Call him today at 404-937-1414 for a free teleconsultation or fill out an online contact form. Serving both Atlanta and Marietta.
