Ohio residents might like to know how to use charitable trusts as part of an estate plan. Assets in a split interest charitable trust are divided between one or more charities and a non-charitable beneficiary or beneficiaries. There are two types of charitable split interest trusts.
A charitable remainder trust allows a benefactor to donate assets. This trust is best when one has highly valued items or items that do not generate any income. During the term of this trust, there is an annual payout to a beneficiary. The assets pass to the selected charities once the trust’s time period has elapsed.
Benefactors can use CRTs to sell assets in a trust without paying capital gains taxes. Real estate or stocks might go into a CRT, and this allows a charity to receive the full market value of the item. A partial income tax deduction might apply with a CRT as one will eventually be donating to a charity.
Charitable lead trusts work by giving a payout to a charity while the remainder goes to a beneficiary once the trust term expires. A donor can select the term of a trust and the annual payout amount. A CLT could also provide a charitable income tax deduction if established during a donor’s lifetime.Assets in a trust belong to the trust instead of an individual. This lowers estate taxes and can preserve money for heirs.
Donations are only a small part of estate planning as many people must determine how to leave assets to loved ones and decide who will make decisions in the event one cannot speak for oneself. When leaving an estate behind, trusts allow benefactors to provide instructions for distributing assets. People may wish to consult an attorney when preparing their plans.