What Types of Charitable Trusts Can Be Used in an Estate Plan?

A well-crafted estate plan will not only ensure the smooth transfer of assets to a person’s loved ones after they pass away, but it also allows them to leave a lasting legacy through charitable giving. Charitable trusts are powerful tools that can be utilized as part of an estate plan, and they can not only benefit charitable organizations, but they can also help a person and their family meet their own financial goals. For those who are considering how to incorporate charitable giving into their estate plan, an experienced attorney can provide invaluable guidance. Some options for charitable trusts include:

1. Charitable Remainder Trust (CRT)

A charitable remainder trust is a type of charitable trust that allows a person to support a qualified charity while still providing for themselves and other beneficiaries during their lifetime. With a CRT, a person will transfer assets – such as cash, securities, or real estate – into the trust. The trustee manages these assets and makes regular payments to the grantor or other named beneficiaries. A person will have the option to receive either fixed annual payments (annuity trust) or variable payments based on a predetermined percentage of the trust’s value (unitrust). These payments may continue for a fixed term or for the lifetime(s) of the beneficiary or beneficiaries. Upon termination of the trust, any remaining assets will be distributed to one or more designated charities.

2. Charitable Lead Trust (CLT)

In contrast with charitable remainder trusts, charitable lead trusts provide for regular donations to be made to one or more charitable organizations for a specified period of time. After that period ends, the remaining assets in the trust will then be distributed to other beneficiaries, such as family members. As with a CRT, a CLT may be structured as either an annuity trust or a unitrust.

3. Pooled Income Fund (PIF)

A pooled income fund is a type of trust that combines the contributions of multiple donors into a shared investment pool. The income generated by this pool is then distributed to the beneficiaries, with each beneficiary receiving an amount proportional to their share of the total contributions. A PIF allows a person to make a charitable gift while retaining an income stream during their lifetime. When assets are contributed to a pooled income fund, a person is entitled to an immediate charitable deduction based on the present value of the expected contribution that will eventually pass to charities upon their death.

4. Charitable Gift Annuity (CGA)

A charitable gift annuity is another way to combine philanthropy and financial planning in an estate plan. With a CGA, a person will make a significant donation – typically cash or securities – directly to a qualified charity in exchange for the charity’s promise to pay them or other designated beneficiaries annual payments for life. The rate at which these payments are made depends on several factors, including the person’s age at the time of the donation and current market conditions. 

Contact Our DuPage County Charitable Trusts Attorney

If you are considering including a charitable trust in your estate plan, or if you have any other questions related to estate planning matters, the skilled attorney at [[title]] can provide the guidance and assistance you need. We will advise you on the best options for giving to causes you believe in and creating a lasting legacy while still providing for the needs of yourself and your loved ones. Contact our Naperville legacy planning lawyer today at 630-756-1160 to schedule a consultation and let us help you create an estate plan that fulfills your personal objectives while meeting your philanthropic goals.

Sources:

https://www.nerdwallet.com/article/investing/estate-planning/charitable-trust-remainder

https://www.fidelitycharitable.org/guidance/philanthropy/pooled-income-funds.html

https://www.investopedia.com/terms/c/charitable-gift-annuity.asp