The benefits of charitable trusts

Charitable trusts are a great way to benefit everyone in Montana. These are instruments that provide funding for non-profit organizations. Charitable trusts are also structured to incentivize giving by wealthy people because of the tax benefits they provide. There are a few different ways that charitable trusts can be controlled and directed..

Remainder trusts

Charitable trusts are usually formed with liquid assets. These include stocks, which can easily be converted to cash, or cash itself. The trust serves to set the assets aside for the benefit of a charity. There are two major ways of managing a trust. The first is called a remainder trust.

In a remainder trust, the assets are given to a charity for a set period of time. During that time, the charity manages them and reaps the benefits of any interest they earn. The trust can be set up for a firm period of time, say 10 years, or it can be tied to a specific event. Some philanthropists set up trusts that will expire 20 or 50 years after their death. At that point, the assets and interests may revert to the charity, becoming their property instead of the trust’s.

Lead trusts

The biggest difference between remainder trusts and lead trusts is control. In a lead trust, the donor decides how the money is managed. Part of the interest must proceed to the charity, but part can also go to beneficiaries chosen by the donor. Both charitable trust structures are effective tools for funding.

Anyone interested in setting up a charitable trust should contact a lawyer who has experience with estate planning. Charitable trusts are a wonderful way to give back while reaping tax advantages. Many famous non-profits, including the Bill and Melinda Gates Foundation, are funded by charitable trusts.