Charitable Surplus Trusts allow donors to gift property and assets to a specific charity or non-profit entity while retaining and using those assets for as long as they are alive. Upon the donor’s death, the assets are transferred to the designated charity, providing tax benefits and reducing estate taxes. The trust cannot be revoked, but assets can be redirected to a different charity if it meets requirements.
Charitable Surplus Trusts are arrangements that allow the proceeds of a gift of property and assets to a specific charity or non-profit entity, but allow the grantor of the trust to retain and use those assets for as long as he or she is still alive. Upon the death of the grantor, the assets are transferred in their entirety to the designated charity or non-profit organization, and may be used as the organization sees fit. The donor has peace of mind knowing that the assets will eventually be used for a good cause, and it also provides some great financial advantages in the meantime.
One of the main advantages of a charitable remainder trust is that grantors can avoid any type of capital gains tax on assets that are donated through the charity. In the event that the donated assets continue to generate short-term income, the grantor may also take a tax deduction for the fair market value of the interest income earned from the asset. These provisions help make it possible for the donor to benefit from their assets for the rest of their lives, both directly and indirectly.
Another consideration for entering into a charitable remainder trust is the fact that the assets held in the trust are not counted as part of the remaining estate. This will mean that the estate taxes that will apply at the time of death will be significantly reduced. For survivors who inherit the portions of the estate that are not connected to the charitable remainder trust, this benefit can make a big difference in the liquidation and distribution of the remaining assets in accordance with the wishes of the deceased.
One thing to note about a charitable remainder trust is that the trust cannot be revoked once it is established. However, there are some provisions for redirecting assets from one charity to a different one, assuming the new charity meets the associated requirements. Financial planners can help interested individuals determine the exact structure and function of the remaining charitable trust, as well as prepare projections about how the trust arrangement would benefit the donor in the long term.
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