Are considering using a Charitable Trust to lower your estate taxes, protect your assets, and give to a charity close to your heart? If so, you have two options: a remainder Trust and a Lead Trust. Both types of Trusts may be Annuity or Uni-Trusts which will affect the size of payments that the Trust provides.
If you are looking to completely remove assets from your estate, a Remainder Trust may be best. Everything you place into this Trust will be removed from your Taxable Estate. This is because upon your death, all that remains in the Trust will pass to the chosen charity and remain outside of your taxable estate.
Funds in a Charitable Lead Trust will only be free of estate taxes if they are actually given to the charity. During your life, the charity of your choice will receive regular payments from the Trust. After your death, the Trust will be part of your taxable estate. This is because what remains in the Trust will pass to your heirs.
Both types of Trusts offer asset protection while the Trust is in existence. With a Lead Trust, however, asset protection will matter more to you since your heirs will inherit the Trust after you are gone.
If you are looking for a lifetime source of income, a Charitable Remainder Trust is what you want. While you are alive, you will receive a stipend from the Trust. If the Trust is an Annuity, you will receive fixed payments and you will not be able to add into your Trust after it is created.
If your Remainder Trust is a Uni-Trust, you can contribute more into the Trust during your life and you will receive income based upon the performance of the Trust.
Inheritance for Heirs
If you are looking to use a Charitable Trust to protect an inheritance for your children, then you may prefer a Lead Trust. The one downside to using a Lead Trust as a form of inheritance, is that Trust may not be worth as much as you would like when your heirs receive it. This could be due to prolonged payments to the Charity or poor performance of investments.