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Law Office of DeAnne E. Parker
Redding Probate, Trusts, Estate Planning And Business Attorney

Overview of charitable trusts

Many residents of Northern California may wish to leave some or even all of their fortunes to their charities. There are a number of ways in which a person can accomplish this goal. For instance, for some, the best course of action may be to set up a charitable trust.

Charitable trusts can offer a number of important tax incentives to those who set them up. Even if estate taxes or inheritance taxes are not an issue, charitable trusts also offer income tax and capital gains tax incentives, if they are set up properly. Moreover, a charitable trust allows the donor to give money to charity, but maintain some oversight, thus helping the donor ensure that his or her money is being used according to his or her wishes.

Charitable trusts can be grouped into two types. In the first type, called a remainder trust, the charity receives income during the life of the trust. Once the trust terminates, the charity will receive the remainder, that is, the property left in the trust. The charity can then liquidate the property without having to pay capital gains tax on it.

On the other hand, in a lead trust, the charity will receive income from the trust during the life of the trust. Once the trust expires or is terminated though, then someone else may receive the remainder property. Oftentimes, the remainder will go to the donor's loved ones. The lead trust, thus, gives a donor an opportunity to both make a gift to charity and provide for friends and relatives.

Charitable trusts are not always easy to organize and draft. A carefully attention to detail and a clear understanding of one's objectives are required.

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