Besides taking care of your family’s financial security and keeping control over your future medical care, your estate plan can also help you support causes you believe in as part of your legacy. In New York, charitable planning tools, including a charitable trust, can help you do this in a sustainable way while creating tax breaks for yourself and your heirs.
The two types of charitable trusts
Like any other trust, a charitable trust is an estate planning instrument. You populate it with assets, and a trustee administers the trust for the benefit of another party. In this case, one of the beneficiaries is a charitable institution. Typically, however, the trust has other beneficiaries, usually the person who set up the trust, their spouse or children. There are two basic options: charitable remainder trusts (CRTs) and charitable lead trusts (CLTs).
A CRT works by paying an income stream to yourself or other individuals you select as beneficiaries, either for a set number of years or until you pass away. At that point, the remaining assets in the trust go to the designated charity. A CLT works the opposite way; the trust first pays an income to the charity, then after your death or the set term of years ends, the remainder passes to your individual beneficiaries. Which one would make sense for you depends on factors like your age, how many children you have, and the extent of your retirement savings.
Finding the right trust
As with any estate planning decisions, you should know all your options before proceeding with a charitable trust. Working with an estate planning attorney who knows applicable New York law will arm you with the necessary knowledge and help you need to pass along your wealth while also helping take care of a cause close to your heart and minimizing the risk of a trust administration dispute later on.