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How to use charitable trusts to support great causes

Kent area residents often believe it's important to support their favorite charities. Charitable giving can also be part of estate planning. Once people take care of their heirs via their estate plan, they may consider establishing a legacy of giving.

One way to incorporate charitable giving into an estate plan is to set up a charitable trust. There are generally two types of charitable trusts. The first is a charitable lead trust. A charitable lead trust is where the charity you choose receives the interest from the gift for a specific amount of time, like 10 or 20 years. After the time is up whatever is left in the trust goes to the beneficiary -- either an heir or back to the donor. A charitable lead trust works well to reduce the donor's taxable income and when the remainder of the trust is transferred back to the beneficiaries it can reduce the gift tax and estate taxes.

The second type of charitable trust is a charitable remainder trust. A charitable remainder trust is a good tool for those who have appreciated assets with low cost basis such as stocks and real estate. This trust sends an annual interest payment to the donor and then gives the remainder of the asset to the charity at the end of the term. The donor determines how much the interest payments are which guarantees them a steady source of income.

Charitable trusts can be good tools in the estate planning tool chest. People who are interested in learning more about setting up a charitable trust may find that speaking with a legal professional skilled in estate planning to be helpful.

Source: Bankrate, "Setting up a charitable trust," Julie Sturgeon, accessed on Nov. 10, 2014

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