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Balancing charity and family in estate planning

On Behalf of | Jan 15, 2024 | Estate Planning

Using trusts to leave money to charities and loved ones is a strategic component of estate planning, offering flexibility, control and potential tax benefits. Trusts enable individuals to specify how their assets should be managed and distributed, ensuring their philanthropic and familial intentions are honored.

Consider these points about supporting charities and family members in an estate plan.

Setting up a charitable trust

There are two primary types of charitable trusts: charitable remainder trusts and charitable lead trusts. In a charitable remainder trust, the trust provides income to non-charitable beneficiaries for a period, with the remaining assets eventually going to a charity. This type of trust allows you to support loved ones first and then a charity.

A charitable lead trust works oppositely. The charity receives the income interest first, followed by the non-charitable beneficiaries. This structure is often chosen for its potential to reduce estate and gift taxes.

Trusts for loved ones

Revocable living trusts are adaptable and can be changed or revoked during the grantor’s lifetime. They allow for specifying how and when assets will be distributed to beneficiaries, bypassing the probate process.

Irrevocable trusts, once established, can’t be easily changed or revoked. These are often used for their asset protection qualities and tax planning benefits. Special needs trusts are a type of irrevocable trusts that are designed for special needs beneficiaries, providing care without affecting their eligibility for government benefits.

Working with someone familiar with trusts and how they work with a creator’s wishes is critical. This ensures you’re able to form a comprehensive estate plan that meets all your needs.