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What is a charitable trust?

If you are a Florida resident for whom charitable giving is a way of life, you may wish to consider setting up a charitable trust so that you can substantially contribute to your favorite charity. You may not be aware that your charitable trust can be structured so that the assets you place in the trust can be split between the charity and someone you choose as your non-charitable beneficiary. That person may even be yourself.

Fidelity Investments explains that you have two choices for a charitable trust: a charitable lead trust and a charitable remainder trust. Both types give you a good deal of control over and flexibility with your contributed assets. Both types also can help you achieve your goals, not only for philanthropy, but also for tax management and estate planning. The type(s) of assets you wish to place in the trust, plus your targeted wealth preservation and estate planning goals will determine which kind of charitable trust you should choose.

Charitable lead trust

In this type of trust, the interest income from your donated assets goes to your designated charity for a specified period of years. Another option is to make the time period nonspecific, such as for your lifetime or that of your designated noncharitable trust beneficiary. The trust terminates at the end of the time period and you or your chosen beneficiary receive all remaining assets.

Charitable remainder trust

As with a charitable lead trust, a charitable remainder trust also exists for a period of time, usually 20 years, or during the lifetime of you or your designated non-charitable beneficiary. In this type of trust, however, you or your chosen beneficiary gets a yearly payout and the charity receives the trust assets, including any appreciation thereon, when the trust ends.

This information should not be taken as legal advice. It can, however, help you understand the process and what to expect.

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