Charitable Trusts

Types Of Charitable Trusts

Types Of Charitable Trusts

There are two main types of charitable trusts most often used by individuals:

Charitable Remainder Trust

A charitable remainder trust, or CRT, is a trust that is set up to benefit one or more primary beneficiaries during their lifetimes. When the beneficiaries pass away, the assets that remain are donated to one or more charities. These trusts are sometimes referred to as charitable unitrusts, or charitable uni-trusts. They allow a donor to take a substantial tax deduction up-front for a gift that will be made upon his or her death. Further, they allow for a donor to avoid capital gains taxes on appreciated assets that are donated to the trust.

Charitable Lead Trust

A Charitable Lead Trust, or CLT, is similar to a Charitable Remainder Trust, except that it is the charity that receives income for the lifetime of the beneficiary. When the beneficiary passes away, the remaining assets go to his or her heirs. It is sometimes referred to as a "Reverse Charitable Remainder Trust." They allow for tax-free income to be generated from an asset pool and donated to charity during the course of a donor's lifetime, while preserving an asset base for the benefit of the owners heirs or chosen beneficiaries.

Each of these types has its advantages and disadvantages, along with various subtypes underneath it. Of course you'll want to consult an attorney before setting up one of your own. For more information on the various particular types of charitable trust, check out the links to your right.

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