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What you should know about charitable trusts

Estate planning can be an uncomfortable topic for people. However, when the time comes to administer an estate, a little planning can be of considerable relief to the people affected by a person's loss by providing clarity and direction to loved ones.

For instance, if you decide you want some or all of your assets to go to a charitable organization, you can make sure this happens by setting up a charitable trust. Doing this now allows you to achieve a few different goals.

  1. Take advantage of the considerable tax incentives. This includes lower estate taxes and capital gains taxes, as well as income tax deductions.
  2. Depending on the type of charitable trust that is established, you can make a meaningful contribution to charity and still provide for your heirs.
  3. You can control the financial contributions you want to make to charity without leaving the decision in the hands of courts and/or your loved ones.

These can all be good reasons to start a charitable trust. However, it is also important to understand that these trusts are not for everyone, and there are a few obstacles that can arise.

For instance, just like wills, trusts can be vulnerable to contests. If someone calls your mental capacity into question or suspects undue influence or fraud, he or she may challenge the validity of a trust.

Additionally, once you set up a charitable trust, you cannot take it back. This is because it is an irrevocable trust, which means it can't be changed or terminated unless the beneficiary gives you permission to do so.

Taking all this into consideration, you may decide that a charitable trust is something you want to explore further. If this is the case, then it would be a good idea to discuss starting a trust with an estate planning attorney. Doing so can help you avoid costly legal mistakes and minimize the potential for disputes in the future.

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