What are the tax benefits of a charitable trust?

Many people find, as they accumulate a significant estate, that they become more and more interested in exploring their options for including charitable giving in their estate plan. One of the most versatile and useful forms of charitable giving in estate planning is funding a charitable trust with some of your assets. While the specifics will vary according to your circumstances and desires for the trust, charitable trusts are not only a great way to leave your impact on a cause you care for, they also provide some excellent tax advantages.

Upon the creation and funding of a charitable trust, the creator of the trust may claim a significant tax deduction, which can be doled out over five years. While you are not allowed to deduct the entire amount that you used to fund the trust, you are allowed to deduct the initial funding amount minus the projected earned interest. If, for example, you fund the trust with $50,000, and anticipate earning $20,000 on that investment before you pass away, then you may deduct $30,000 over the five years after you create and fund the trust. Furthermore, assets placed in a charitable trust are not subject to estate tax.

Even more exciting, however, is the opportunity that a charitable trust offers for capitalizing on some forms of property. The assets placed in the charitable trust may be sold by the trust without triggering capital gains taxes, which can be used to avoid a significant amount of harsh taxation. A piece of property that had increased in value from $100,000 to $200,000 dollars since its purchase can be placed in a charitable trust and sold by the trust. The trust may then invest the funds resulting from the sale and pay some of the dividends to the individual who originally funded the trust.

Each situation is different and must be considered carefully in order to maximize the potential of your charitable giving. With proper legal guidance, you can take your resources and make the most of them, building a legacy you deserve and ensuring that more of your assets remain where you want them.

Source: FindLaw, “Tax Incentives for a Charitable Remainder Trust,” accessed March 10, 2017

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