Every adult should have an estate plan in place so their loved ones can follow the plan when the creator dies. If you’re in the process of creating your estate plan, you have to carefully consider each asset and what you want to do with it.
If you have any charitable causes that are close to your heart, you may decide that you want your estate plan to support the cause. One option for doing this is with a charitable trust, but not all of these function in the same manner.
2 types of charitable trusts
There are two types of charitable trusts that you can choose from. One is the charitable remainder trust. This allows your beneficiaries to receive the benefits of the trust for a specific number of years or until their death. Once the time expires or the beneficiary dies, any contents remaining in the trust are passed to the charity of your choice.
The other type of charitable trust is the charitable lead trust. In this type of trust, the charity receives the benefits of the trust first. Once the set number of years or amount of support listed in the trust is met, the remainder of the trust shifts to the intended beneficiary.
Tax benefit of charitable trusts
One of the biggest benefits of charitable trusts is that they come with significant tax advantages. These can come in the form of reduced estate taxes or capital gains taxes. These reductions in taxes can mean that the trust’s contents aren’t eroded by having to pay taxes, so the beneficiary or charity can receive more of the inheritance.
Creating an estate plan requires you to think carefully about what you want for each asset. Having guidance from someone who understands your wishes and can help you determine how to make it happen is beneficial. It’s a good idea to do this as soon as possible so you have the peace of mind knowing your wishes are clearly relayed for your loved ones to follow when you pass away.
