People who are creating their estate plan sometimes want to support a charity of their choice. One option they have for doing this is to establish a charitable trust that makes it possible to make a posthumous donation.
Anyone who wants to establish a charitable trust should determine what type of trust is the most appropriate for their needs. There are two primary types of charitable trusts to consider, each of which works in a different manner.
The positive side of these trusts is that the creator of the trust can set the terms they want for the distribution. These can be set up to distribute the income the trust earns, the principal assets in the trust or a combination of both.
1. Giving to the charity first
A charitable lead trust makes a set distribution, either monetarily or for a specific period of time, to the charity. Once that’s done, the remainder of the assets in the trust are distributed to the named beneficiaries.
2. Giving to beneficiaries first
A charitable remainder gives assets to the creator’s chosen beneficiaries first. Whatever is left after the required distributions are made will transfer to the named charity.
A charitable trust is only one part of a comprehensive estate plan. Adults must also create their will and may also need power of attorney documents and other components so their wishes can be accurately and completely relayed. Discussing the situation with someone familiar with estate planning can help them to learn their options and get the plan established.