Law Office of Stephen W. Penn and Associates

What is a charitable trust?

If you are one of the many Californians for whom giving back to your community is a big part of your life, you may wish to consider establishing a charitable trust as a means by which to donate to your church or favorite charity in a long-term structured manner. As Fidelity.com explains, however, a charitable trust represents a new twist on the old adage: "The more you give, the more you receive."

When you establish a charitable trust, you can split the assets you put into it between your charitable beneficiary and yourself or another noncharitable beneficiary. You also can name yourself as the trustee.

Your benefits

There are two basic types of charitable trusts: charitable remainder trusts and charitable lead trusts. Either one provides benefits not only to your designated charity, but also to you as follows:

  • You retain control of the assets you place in the trust.
  • You can choose how to distribute those assets and the income they produce.
  • You may receive substantial tax benefits.
  • You have the satisfaction of fulfilling your charitable giving goals and objectives.

You also have the flexibility of choosing how long your charitable trust lasts. Many people choose a specified time period such as 20 years. Others choose to keep the trust in existence throughout their lifetime or the lifetime of their other or co-noncharitable beneficiary.

Remainder versus lead trusts

Should you choose to establish a charitable remainder trust, the income that its assets produce is paid to your noncharitable beneficiary each year. When the trust ends, all remaining assets go to your charitable beneficiary.

Should you choose to establish a charitable lead trust, the results are just opposite. The income produced by the trust assets goes to your charitable beneficiary each year. At the end of the trust period, all remaining assets go to your noncharitable beneficiary.

As you can see, a charitable trust is a win-win proposition. This is general educational information only and not intended to provide legal advice.

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  • SCBA | Santa Clara County Bar Association | EST 1917
  • State Bar Of California | California Board Of Legal Specialization | Stephen W. Penn
  • Henry P. Collada Memorial Award 2012