Charitable Trusts Basics

Charitable trusts are another key estate planning vehicle to make philanthropic contributions, appropriate property and assets, and reduce individual estate taxes. A charitable trust is not tax exempt and, as an irrevocable trust, the arrangements of charitable trusts are difficult to alter or amend at a later date. Even still, charitable trusts often entitle donors to considerable income tax deductions and lower estate taxes. Our Chicago estate planning attorneys are dedicated to providing individuals, professionals and families with the necessary legal counsel to structure an economical and effective charitable trust.

Charitable trusts enable donors to pass on their legacy to their loved ones and the charities of their choosing while generating income tax deductions and estate tax reductions. Charitable trusts are also incredibly valuable in their ability to preserve highly appreciated assets by letting these assets acquire value even after the passing of the donor.

Types of Charitable Trusts

Charitable TrustsA charitable remainder trust establishes the legal framework for a donor to provide a non-charitable beneficiary, such as a spouse, a child or other loved ones, with a fixed flow of income for some specific time period. This time period could be outlined to last for the entire life of the recipient or a predetermined span of time not surpassing 20 years. Charitable remainder trusts will then bestow the “remainder” of the donor’s assets to some pre-selected charitable organization(s). One important advantage of charitable remainder trusts is that they may be supported by appreciating assets, such as stocks or real estate, so that the charitable and non-charitable beneficiaries receive maximal support.

A charitable lead trust functions much like charitable remainder trust in that both trusts divide the donor’s estate and assets between charitable and non-charitable beneficiaries. The key difference between these two forms of charitable trusts though is that the charitable lead trust sets aside contributions to the charitable foundation first.  For professionals and families with a high priority for philanthropic engagement, the charitable lead trust offers the structure to ensure a legacy of impact for desired charitable organizations.

Charitable trusts offer the greatest impacts for donors with highly appreciating assets where a donor’s estate property and assets can gradually accrue value. Charitable trusts over time can utilize these appreciating assets to create a lasting impact for loved ones and non-profit organizations alike. Charitable trusts are irrevocable and legally challenging, meaning that a poorly structured trust plan can be difficult to rearrange or correct.  Our Chicago Estate Planning Attorneys provide the legal representation for individuals, executives and families to create an individualized charitable trust suitable for any needs.