One of the primary goals you probably have when you begin the estate planning process in Michigan is to keep as many of your assets as possible from being taxed so that you can preserve them for your heirs. Trusts are tools that may achieve your objectives. At the Bingham Legal Group PC, we often advise people about the benefits of charitable trusts.
According to Fidelity, if you decide to set up this type of trust, not only are you supporting your favorite cause, you may be able to significantly reduce the amount of money that goes to the IRS. For example, you may receive income tax deductions based on your donations to charity. Depending on whether you opt for a charitable remainder or lead trust, you may qualify for a gift tax deduction, as well. Because the assets that you place in the trust are no longer officially part of your estate, your beneficiaries will not lose as much money to estate taxes.
If you have an investment such as a vacation property that is not producing any income, you may be able to donate that asset to a charitable remainder trust. The CRT then sells the asset and holds the amount back to give to charity upon your death. You would not need to pay taxes on the property sale because the trust is tax exempt. Meanwhile, the interest would be paid to you throughout your lifetime.
A charitable lead trust works similarly, but the interest during your lifetime would go to the designated charity, and after your death the remainder would go to your beneficiary. More information about estate planning options is available on our web page.