Charitable Trusts: Leaving a Legacy Through Your Estate Plan

 Posted on January 10, 2023 in Estate Planning

Giving to charity through an estate plan allows a person to leave a lasting impact beyond their own lifetime. Charitable trusts are one of the most powerful and effective estate planning tools for those who want to give back to those in need. A charitable trust is an irrevocable trust that provides tax benefits for both the donor and the charity receiving the funds. If you are interested in giving money or other assets to charity, work with an estate planning lawyer who can provide the guidance you need.

Basics of Charitable Trusts in Illinois

When you create a charitable trust, it must be in writing and must meet the criteria set by Illinois law. It must also meet the qualifications of a charitable organization, which means that it must have an independent board to oversee investments, spending, and donations. The trust should specify the types of charities that can receive funds from it, as well as any restrictions for those contributions.

Benefits of Charitable Trusts

Charitable trusts offer tax breaks for the donor. The donor is entitled to deductions on their income tax return for any contributions made through the trust. In addition, since the funds are given directly to charity, there are no capital gains taxes due when the funds are distributed from the trust.

Creating a Charitable Trust

When creating a charitable trust, the donor must choose a trustee to manage the funds and make sure that the money is distributed according to their wishes. The trustee can be someone you know or an entity such as a bank that specializes in managing trusts. You should also decide if you would like to set up a charitable lead trust or a charitable remainder trust. With a charitable lead trust, the charity receives income from the assets in the trust for a certain number of years. After that time period ends, the remaining balance is then distributed to designated beneficiaries. A charitable remainder trust pays out income to designated beneficiaries for their lifetime, and then the remainder of the funds are distributed to charity.

Contact Our Kane County Estate Planning Lawyer

If you are considering leaving a legacy through charitable giving, charitable trusts may be an ideal estate planning tool for you. Charitable trusts can provide tax benefits to donors while also allowing them to give back to causes they care about.

Geneva estate planning attorney Lorie Krajniak can help you set up an estate plan that meets your needs, carries out your final wishes, and minimizes taxes. Call 630-448-2406 for a free initial consultation.

Source:

https://www.irs.gov/charities-non-profits/private-foundations/charitable-trusts