Supporting a cause they believe in through charitable gifting is an important part of many people’s estate plans. While it is possible to leave a charitable gift through a will, a trust is often a better way to support a nonprofit. One of the most popular charitable trusts is a charitable remainder trust, CRT, a tax-exempt irrevocable trust that generates income for the creator while reducing the taxable income of individuals and support charities. There are many advantages to a CRT, however, there are alternatives to a charitable remainder trust that may be a better fit for your goals and your situation.
1. Charitable Lead Trust
A Charitable Lead Trust (CLT) is the opposite of a Charitable Remainder Trust. The income from the trust is paid to the beneficiary, which is the designated charitable organization. When the trust’s term ends, any remaining assets in the trust are distributed to the living beneficiaries specified by the trust document. The CLT must donate enough money to the charity to qualify for the estate tax deduction.
2. Pooled Income Fund
A Pooled Income Fund is a good alternative for individuals who want to gift a small amount to a charity, or who do not want the expense of setting up a trust. Many charities have set up Pooled Income Fund trusts to make it easier for donors to make a donation to their organization. Donors to a Pooled Income Fuch qualify for an income tax deduction, based on their life expectancy and anticipated income stream, but they must pay annual income taxes on the income they receive from the fund.
3. Donor-Advised Fund
A donor-advised fund is a charitable investment account sponsored by a charity. Donors-Advised Funds allow donors to make a donation to their chosen charity and receive an immediate tax benefit. Your donation can grow tax-free and be granted to charitable organizations at any time. Donor-advised funds do not generate income for the donor.
A charitable gift trust provides numerous tax benefits. It allows the donor to support a charity while also meeting the future needs of family members and other loved ones. A trusts and estates lawyer can analyze the circumstances involved to determine the projected tax implications and the best charitable gift option for your situation.
Do you have questions about charitable giving? Our experienced estate and probate attorneys in Cook, Dupage, Kane, Lake, and Will counties in Illinois can advise you on the best options to protect your assets and loved ones. To talk to a trust attorney contact the Estate & Probate Legal Group at 630-687-9100.