For many people, they have an extremely generalized idea of what types of options for estate planning exist, which is usually the trust fund concept of estate planning. A trust fund is a type of entity that is legally bound and allows whatever entity to hold money, property, and/or assets on behalf of another party. Although it may be assumed that you must be wealthy to create a trust fund of your own, or that you must be wealthy for any other type of estate plan, this is untrue. As a matter of fact, it would most likely benefit your family members to leave some sort of trust for them for when you have died. One particularly great form of trust for your estate planning that is, unfortunately, not spoken about often is a charitable lead trust. Even though this type of trust has a wide range of benefits that can ease the process for your family members or friends after you have passed, it is important to recognize what it is exactly and what these benefits are. Here a few of the many benefits of a charitable lead trust.

Firstly, What Does This Type Of Trust Entail?

The most important thing to recognize and acknowledge before getting into the benefits of this type of trust is what does a charitable lead form of trust entail? On the most basic of terms, it begins with the person establishing the trust and making a contribution to fund the trust. This contribution will fund it for a fixed number of years, based on however long it was set up to last, and payments from this overall contribution will be given to the chosen charity as either a fixed amount given annually or a percentage of the trust. At the end of the term, the assets that are still remaining will then be distributed to predetermined beneficiaries, which are often family members of close friends. Although this process may seem simple, there are a few things that go into each step to ensure the legality of the trust and that the money will be sent to the right parties. For example, the payment to at least one qualified and legitimate charity must be made annually, although unlike the charitable remainder trusts, there is not a mandatory time limit that you must abide by. By following the regulations of a charitable lead type of trust, you are able to reap all of the benefits. 

Multiple Tax Reductions

A majority of people who chose to acquire a charitable lead trust do so for the tax break that comes along with choosing to get one. With this trust, you are able to reduce the estate taxes that must be paid following the termination of a trust. Although the assets contributed to this trust will be considered as part of the donor’s, the person who contributed the fund, estate, the estate will be able to possibly receive an estate tax charitable deduction for the value of the interest given to the charity. This is beneficial because it is able to reduce the amount of tax that the estate must pay upon your death while also preserving the wealth of the beneficiaries of whom will be receiving the assets. As well, if a contribution to a non-grantor form of this particular form of trust was made while you were alive, it can mean that you are eligible for a gift tax charitable deduction, which is dependent on the current value of the interest going to the charity. While you may subject yourself to the gift tax on the value of the remainder interest, the trust can be structured to eliminate the gift taxes on the remaining amount that will be passed down to the beneficiary. However, this tax reduction can be beneficial to those who come into a large amount of money all at once, like a person who has won the lottery, This can prevent having too much taxable income in one specific calendar year that can inflate the number taxes you must pay.

Donate Large Quantities Of Money To Legitimate Charities

While this may not be the common focus for many people who are currently in the works of setting up their estate planning, creating this particular form of trust can allow a good amount of money to be donated to one or more charities. Charities are reliant solely on the money that is donated to them by generous people and organizations so by providing them with a reliable flow of income for however long the trust is meant to last can assist to keep them up and running. Of course, the charity that you choose does not matter because as long as the charity is legitimate and is written into the documents of the trust, meaning that as long as it is documented as being the organization that will receive the annual payments from the fund, then you have a wide range of charities to choose from, each having different goals. Often times, the charity that is chosen is one that works on fulfilling a mission that is important to the person creating the whole trust. For example, those that support the prevention of human suffering when confronted with emergencies would then likely make American Red Cross the charity they wish to donate to.

It Is A Good Idea For Any Person

As previously mentioned, while people may believe that a trust fund like this may only be meant for those who are wealthy, this is not true. Of course, this is a great idea for people who are well off but you do not need to be in order to create one for yourself. If you are unsure if a charitable lead trust is right for you, then this is a perfect time to contact the qualified attorneys at Heller Espenkotter PLLC. These attorneys have dedicated their livelihoods to assisting people to determine the best type of trust fund for them and charitable lead trust is many times a great fit. Contact them today for a consultation on the best plan of action for your estate planning!