J. Kelly Kennedy, Attorney/CPA, PLLC

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Attorney and CPA

How might an irrevocable trust benefit a charity and a settlor?

No two Winter Haven residents have the same estate planning objectives, but there are often commonalities among them. Many would like to provide for family members and loved ones. Many also would like to provide for a charitable cause such as a school, college, place of worship or institution that helps the less fortunate. People who would like to give generously while realizing tax benefits may want to set up a charitable trust.

A charitable trust is an irrevocable trust set up to benefit a charitable institution approved by the Internal Revenue Service. The trust settlor transfers assets to the trust. The trust is irrevocable, so the settlor should remember that the assets will not be returned. The charitable institution becomes the trustee; they invest, protect and manage the trust funds. The trust settlor will name one or more people to receive a portion of the trust's income. The charitable institution will pay them a set portion of the income of the trust's assets.

There are tax benefits associated with a properly established charitable trust. First, the property given to the trust will not be included in the donor's estate for purposes of the estate tax. Charitable trusts can also be used to allow both the charity and the income beneficiaries to benefit from property without paying taxes on the appreciated value. This is because the charity can sell the property without paying capital gains tax. Finally, the IRS allows the settlor a deduction for a portion of the value of the property given to the trust.

This blog post has provided readers with some general information on charitable trusts. A trust administration attorney can provide more specific information about how a trust could benefit a potential donor and a charity of their choice.

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