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What is a charitable trust?

If giving back to your Missouri community, such as your church, library, favorite charity, etc., makes up a large part of your life, you may want to establish a charitable trust so you can donate to this organization in a more structured way. The same may hold true for your alma mater or other worthwhile organization.

Fidelity.com explains that a charitable trust makes a great vehicle for allowing you to fulfill your philanthropic goals while benefitting yourself at the same time. For each trust you establish, you can name two beneficiaries, a charitable beneficiary and a noncharitable one. Your designated organization becomes your charitable beneficiary, but you can name any person you want, including yourself, as your noncharitable beneficiary.

Your benefits

When you set up a charitable trust, you can do all of the following:

  • Choose which type of trust, lead or remainder, you want
  • Choose the length of time during which the trust will remain in effect
  • Choose which assets you place in the trust
  • Choose how and when the trust assets will be distributed
  • Maintain control over the trust assets if you designate yourself as the trust’s trustee
  • Receive the trust income or the trust assets if you designate yourself as the noncharitable beneficiary

In addition, you may well receive tax benefits from establishing a charitable trust.

Lead versus remainder charitable trusts

As stated, you can choose to establish a charitable lead trust or a charitable remainder trust. If you choose the former, you benefit your designated charitable organization almost immediately because each year it receives the income the trust assets produce. When the trust ends, you get the trust assets back.

If you choose to establish a charitable remainder trust, it works in the opposite way. Here, you or your other designated noncharitable beneficiary receive the income produced by the trust assets each year. When the trust ends, your designated charitable organization receives the trust assets.

This is general educational information and not intended to provide legal advice.

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