What Are the Types of Charitable Trusts

There are two types of charitable trusts, each of which treats the income interest and remainder interest differently:

Charitable Remainder Trusts  A beneficiary named by the donor receives the income interest for life or for a stated number of years, after which the remainder interest is donated to the charity.

Charitable Lead (or Income) Trusts  The opposite…the charity receives the income interest for a stated period of time, with the remainder interest then going to a beneficiary named by the donor.

While each type of charitable trust satisfies different objectives, they share certain common features:

During Life  In order to realize maximum tax benefits, most people create charitable trusts during their lifetime, especially during their highest income-producing years.

Irrevocable  Once a charitable trust is created and becomes operational, it is irrevocable…you cannot regain ownership of property given to the trust.

Tax-Exempt Charities  The gift must be made to a tax-exempt charity approved by the IRS in order to provide the desired tax benefits.

Income Tax Deduction  A split-interest gift to a charitable trust results in a current income tax deduction, assuming the taxpayer itemizes.