Many people associate charitable donation with taxes, financially speaking. This is no surprise, as donations sometimes reduce tax burden considerably.
However, charitable contributions could also have an application in estate planning. Specifically, charitable trusts could preserve traditions of philanthropy — and the wealth necessary to maintain these traditions — across generations.
What is a charitable trust?
Is explained by the IRS, one thing that all charitable trusts have in common is the purpose of the interests. Everything in this type of trust must be for charitable purposes. They must also meet contribution deduction requirements. It bears mentioning that a single charitable trust could serve multiple philanthropic endeavors.
Are these trusts tax exempt?
By definition, charitable trusts are not tax exempt. However, there are various qualifications to this rule. In fact, the matter is so complicated that it is usually more fruitful to look at the specifics of an individual example rather than make general statements on the subject.
Why use charitable trusts?
There are various situations in which it could be advantageous to use charitable trusts. One of the greatest advantages is that they make it relatively certain the interests work towards a good cause. As explained by the State of California Department of Justice, there is a specific section of the Attorney General’s office dedicated to investigating and prosecuting misuse of charitable trusts.
There are many ways to put this type of philanthropy into action. Not all strategies require immediate funding. For example, a will could establish a trust as part of an estate plan. In short: Anyone, at any stage of life, could be in a position to give something truly meaningful back to society.