The potential benefits of funding a charitable trust

On Behalf of | Mar 11, 2024 | Estate Planning |

Funding a charitable trust is a sophisticated estate planning strategy that offers a multitude of benefits, both for a donor and the community at large. By allocating assets to a charitable trust, individuals can achieve their philanthropic goals while enjoying financial and tax advantages. 

If you are interested in funding a charitable trust, know that this approach can both help to ensure that your legacy has a lasting impact and also provide you with strategic benefits during your lifetime. 

Tax benefits

One of the most immediate benefits of funding a charitable trust is the potential for significant tax savings. Donors can receive an income tax deduction for the fair market value of the assets transferred to the trust, subject to certain limitations. Moreover, assets placed in a charitable trust are removed from the donor’s estate, potentially reducing estate taxes. 

For appreciated assets, funding a charitable trust can also circumvent capital gains taxes that would otherwise be due upon sale, allowing the full value of the assets to benefit the trust creator’s chosen charitable purpose.

Income generation options

A charitable trust can be structured to provide income to a donor or other named beneficiaries for a period of time before the remainder of the trust assets goes to the designated charity. This feature makes it possible to support a charitable cause while also securing a steady stream of income, which can be particularly helpful for individuals looking to supplement their retirement income while making a philanthropic impact.

Flexibility and control

Charitable trusts offer a degree of flexibility and control over how your assets are used for charitable purposes. Donors can specify the charities they wish to support, the timing of the donations and, in some cases, how the funds should be used by the charity. This allows individuals to align their philanthropic efforts with their personal values and interests.

By supporting causes and organizations that are important to you, a charitable trust can help ensure that your philanthropic goals continue to be met long after your lifetime, benefiting future generations and contributing to the greater good.