Estate planning is a beneficial and practical step for every Ohio family. The foundation of any good estate plan is a will, yet for many individuals, that alone is not enough protection. There are various other tools that you can employ to better secure your interests and maintain control over what will happen to your estate after you pass away. One of these tools is a trust.
Not everyone needs a trust as part of their complete estate plan, but it could be the right choice for you. Specifically, a charitable trust could be the right decision if you intend to leave a large amount of money for a charity or to a non-profit. As with anything that you include as part of your estate plan, you would be wise to ensure the proper drafting of any trust.
What is the purpose of a charitable trust?
Leaving money to charity is a great way to do good and benefit others, even long after you are gone. Setting up this type of trust is not only philanthropic, it can ensure that you control exactly where and to whom your money goes. While it is not tax exempt, it is deductible, and it can reduce the amount of taxes paid on an estate.
What you need to know about a charitable trust
There are two types of charitable trusts that you can form, and the right one for you depends upon your objectives and what you hope to accomplish with your specific trust. The two types of charitable trusts are the charitable remainder trust and the charitable lead trust. These tools can be complex, and there are both legal and financial considerations with each. A simple explanation of their differences is as follows:
- Charitable remainder trust: This is ideal for a person with certain types of assets, such as stocks or real estate. Trust assets can be sold without the accumulation of capital gains.
- Charitable lead trust: This type of trust is ideal for a person hoping to reduce their taxable income and is particularly useful for people with significant wealth and those hoping to spare beneficiaries of significant estate taxes.
If you believe that a type of charitable trust is the most practical choice for you and your family, you may benefit from seeking its addition to your existing estate plan as soon as possible. Having the right tools in place helps ensure your financial protection and the security of your loved ones.