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The Gifting Season: All About Trusts

The Gifting Season: All About Trusts

December 06, 2016

Charitable trusts can be an important part of any estate plan. Through a charitable trust, an individual can make an irrevocable future gift to a charity and still claim a current income tax deduction for the gift.1

There are two main types of trusts. A charitable lead trust, which provides a stream of income for a certain number of years to a designated charity, allows the donor an immediate income tax deduction equal in value to the future stream of income for the charity and returns to the donor upon the end of the stated period.

A charitable remainder trust is most common. It is a tax-exempt split-interest trust with both a charitable and a non-charitable beneficiary. It provides charitable payments of 5% of either the trust’s initial value or annual value, depending on the format. Your specified beneficiary receives a specified amount of money over time and when the period ends, whatever is left goes to the charity.

The establishment of a charitable trust not only helps the charitable organization, but also reduces your estate taxes. Depending on your personal objectives and current financial situation, one or more of these types of trusts may be appropriate components of your financial plan. Your FAS financial advisor, in cooperation with your accountant and attorney, can assist you in determining which of these alternatives is most appropriate for your unique situation.