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How does a charitable trust give back?

If you are like many Iowa residents, the idea of giving back to your community holds great appeal to you. Whether your church, your library, your school or some other favorite charity, you do what you can to support its efforts. But what if you could do even more?

Fidelty.com explains that establishing a charitable trust can make it possible for you to give back while giving to yourself at the same time. How? Because when you set up a charitable trust, you designate two beneficiaries: a charitable one and a noncharitable one. Furthermore, you can designate yourself as the noncharitable beneficiary as well as the trustee.

Charitable trust advantages

While there is no question but that a charitable trust can benefit your favorite charity, what you may not realize is that it can benefit you, too, in the following ways:

  • You get to choose which type of charitable trust you want, lead or remainder.
  • You get to choose the length of time the trust remains in effect.
  • You get to choose which income-producing assets you will place in the trust.
  • You get to choose when those assets and their income get disbursed to both your charitable and noncharitable beneficiaries.
  • If you designate yourself as the trust’s trustee, you get to retain control over the trust assets while the trust remains in effect.
  • You could get substantial tax benefits.

Lead versus remainder trusts

Remember, you can choose to make your charitable trust a lead trust or a remainder trust. If you establish the former, your charitable beneficiary will receive an annual payment representing the amount of income the trust assets produced that year. You will get back the trust assets once the trust expires.

A charitable remainder trust works in the exact opposite manner. Here you, as the designated noncharitable beneficiary, receive the annual payment of trust income while your charitable beneficiary receives the assets themselves when the trust expires.

This is general educational information and not intended to provide legal advice.

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