CHARITABLE TRUSTS
Charitable remainder trusts
Charitable remainder trusts are another type of life income gift that provide income and attractive financial benefits. They also provide greater flexibility in structuring your life income gift to help meet your personal financial goals. There are two basic types of charitable remainder trusts with many variations. However, certain elements are common to all charitable remainder trusts:
• A charitable remainder trust is created by transferring assets into a trust that pays income to beneficiaries you select. Highly appreciated properties are excellent assets to consider for a charitable remainder trust because the trustee can sell the property without paying tax on any capital gain.
• The donor determines who will receive income from the trust and is not limited to two income beneficiaries as with a charitable gift annuity. Generally, more income beneficiaries means smaller tax deductions and smaller gifts to charity.
• The donor determines how long the income will be paid. Income can be paid for life or a term of years (not to exceed 20 years).
• The percentage payout of the trust (generally 5-10%) and the income amount calculation are determined by the donor. This is where the two basic types of charitable remainder trusts come into play:
Unitrust: Income fluctuates as a fixed percentage of the fair market value of the trust and is determined annually.
Annuity Trust: Income is fixed as a percentage of the initial contribution when the trust is created.
Benefits to you:
Charitable remainder trusts provide income to you and your loved ones and make a significant contribution to The Salvation Army. Donors receive an income tax deduction if the trust is established during your lifetime. Charitable remainder trusts also allow you to avoid probate and bypass or defer capital gains tax when you fund the trust with appreciated property. Charitable gift and estate tax deductions also reduce your estate for tax purposes.
Charitable lead trust
A charitable lead trust is an excellent way to provide current support to The Salvation Army's ministry and pass assets on to family with significant estate tax savings. The lead trust provides income to The Salvation Army for a term of years that you select. When the trust terminates, the assets are transferred to heirs. Unlike a charitable remainder trust, the charitable lead trust does not provide an income tax deduction or life income to you. However, it can provide significant gift and estate tax savings.
Benefits to you:
You can provide significant support for The Salvation Army for a fixed term of years while preserving the asset for your heirs. Charitable lead trusts allow you to transfer the trust assets to your heirs at significantly reduced gift and estate tax costs, depending on investment performance of the trust. Charitable lead trusts also allow you to avoid probate.
