Advantages of Establishing a Charitable Trust
A San Diego, California resident, Brian Gibbs has worked in financial services as a financial consultant and retirement planner. Brian Gibbs has also been CEO and President of San Diego-based Heritage Retirement Advisors, Inc. since 2005, where he works with clients in devising various retirement strategies. Of the different products that can be used to save for retirement, establishing a charitable trust is one way. The charitable trust is a retirement strategy that allows consumers to set up a way for retirees to benefit from their assets while donating to charity and having something to pass on to beneficiaries. The two types of charitable trusts are charitable lead trust and charitable remainder trust. A charitable lead trust distributes some of its proceeds to charity. In return, the person receives a charitable donation tax deduction equal to payments made to the charity. The person’s beneficiaries receive the rest of the principal amount placed in the trust. The other type, a charitable remainder trust, allows the person to receive income through non-income-producing assets placed into a trust. In return, the retiree receives a charitable donation tax deduction based on the remaining value of the assets that have been allocated for charity. At the end of the term, the charity receives the rest of the assets. Establishing a charitable trust has a few financial and tax benefits for the retiree. For one, moving assets into a charitable trust can be one way to avoid capital gains taxes on stocks and real estate if they appreciate. A charitable trust can also help reduce estate taxes because it is considered a generous donation. Finally, this type of trust can help beneficiaries avoid the probate process while also providing an inheritance for loved ones.