If you live in Michigan and are planning your future, setting up a trust is often a smart move, but there are various types of trusts to choose from. If you are philanthropic and are looking for your own estate tax benefit, a charitable trust may be a good option.
According to Investopedia, a charitable trust is beneficial for the charity of your choice, you as the donor and your heirs. In the general sense, you donate assets to the trust and the charity will manage the funds. Throughout the course of your lifetime you receive a portion of the income made from investments, and then the charity receives the assets upon your death, unless you named beneficiaries to continue receiving payments.
There are different types of charitable trusts, and the most common is the charitable remainder trust. Through this trust you can choose to receive either a fixed dollar amount or a fixed percentage of profit every year. Another type is the charitable lead trust, which defers payments and is better from an estate tax perspective.
FindLaw discusses the tax benefits of a charitable trust. There is an income tax deduction that you can spread out over five years. The property in the trust also does not count towards your estate, decreasing the amount of estate taxes at your death. A charitable trust can also decrease or eliminate capital gains taxes on assets, such as stocks or real estate, you donate to the trust.
There are numerous benefits to opening a charitable trust on top of the fact you are helping a specific charity. An estate planning attorney can help you determine what type of trust is best for your needs and goals.