Last updated on October 31st, 2018
Basic Charitable Trust v. Charitable Remainder Trust
Basic charitable trusts are formed with the intention of donating the trust principle, income, or property to your designated charity. Charitable trusts are irrevocable, and are established with the intention of funding a qualified charitable organization.
With a basic charitable trust, the charity of your choosing receives income from the trust for the designated trust term. Once your trust term expires, any remaining principle, income, or property is reverted to your estate and distributed to your beneficiaries.
A charitable remainder trust is formed with the intention of providing your beneficiaries with trust principle, income, or property for a designated term. Once the term of your trust expires, the remaining trust assets are distributed to the charity/charities of your choosing.
With a charitable remainder trust, you are able to provide your family with temporary income, while donating the remainder to your designated charitable organization(s).
Establishing Charitable Trusts
Charitable trusts are irrevocable, meaning you cannot change, revoke, or terminate the trust once it is formed. It is a legally binding document.
Upon forming your trust documents, you must include a list of trust property. You must also name a designated trustee and the eligible non-profit charitable organization to be funded by the trust. You must sign the document, with legal notarization.
As with any irrevocable trust, you must list untitled property in the trust document in order to include it as trust property. Titled property must be transferred to the ownership of the trust in order to be included as trust property.
Once you transfer ownership of property to your trust, you relinquish ownership of the property. Charitable trusts are living irrevocable trusts which assume legal ownership of the property you include in the trust documents.
Adding Property to Charitable Trusts
All irrevocable trusts prohibit transferring property out of the trust. However, you retain the ability to contribute property to the trust over the course of your lifetime. Untitled property is added to the trust as an amendment to the initial trust property list. Titled property is added to the trust by transferring title ownership of the property to the trust, and amending the trust property list.
Remember, inadequate inclusion of property as trust property risks your property’s eligibility for probate and intestate succession. You are only able to transfer property that you own outright into the trust. Property that is not owned, such as a home you are mortgaging or a car that is not titled in your name cannot be transferred into the trust.
Charitable trusts are a great way to support your family and your community, but they must be carefully formed in order to protect your trust’s property.
Schedule a consultation with our estate planning attorney to figure out which charitable trust is best for you.