What is the purpose of a charitable trust?

It is a joy and privilege for some Dallas residents to have the financial ability to support their favorite causes. Many nonprofit organizations depend on donations and charitable giving to fulfill their important missions. During the estate planning process, a Dallas resident can elect to set up a charitable trust to support the entity or entities of their choosing and secure important tax benefits for themselves.

The information contained in this post does not provide any legal advice on charitable trusts or trusts generally. Individuals who wish to explore how charitable trusts may benefit their estate plans can take their questions to their trusted estate planning and administration lawyers.

What is a charitable trust?

Just as an individual can set up an individual trust or a trust for a loved one, they can also set up trusts for charities. Charitable trusts benefit nonprofit organizations through different trust structures including:

• Charitable Lead Trusts (CLT): These trusts benefit charities for an established number of years and when they are completed, the remainder of the trusts go to named parties. Individuals who create charitable lead trusts may benefit from charitable giving on their taxes.
• Charitable Remainder Trusts (CRT): These trusts are the opposite of charitable lead trusts. A named party may benefit from the trust for a number of years, and when the trust is completed, the remainder will pass to a named charity.

Before electing to set up a CLT or CRT, an individual should consult with their trusted estate planning and tax attorney.

How can charitable giving through trusts be beneficial to estate planners?

Depending on how charitable trusts are structured, individuals who establish them may be able to avoid capital gains and may be able to take deductions on their taxes. Similarly, property that is transferred into charitable trusts may be excluded from individuals’ end of life estates and help them avoid taxation during probate. The full benefits of charitable giving can extend beyond these financial aspects, however. To set up charitable trusts, readers can speak with their local estate planning and administration lawyers.