There are many different types of Charitable Trusts, the two most widely used are covered here.

Charitable Unitrust know as Charitable Remainder Trusts (CRT)
CRT's are irrevocable trusts that have two sets of beneficiaries:

• The first set are the income beneficiaries (the person or spouses who created the trust).  Income beneficiaries receive a set percentage of income from the trust during their life.
• The second set of beneficiaries are the named charities. They receive the principal of the trust after the income beneficiaries pass away.

CRT is an irrevocable trust, however the income beneficiaries may change the charitable beneficiaries at any time.

Because the assets are going to charity, CRT's do not pay any capital gains taxes, which can range from 10% to 20% of an asset's growth in value. For this reason, CRTs are ideal for assets like stocks or property with a low cost basis but high appreciated value.

Funding a CRT with highly-appreciated assets (like real estate) allows the income beneficiaries to sell those assets without paying any capital gains taxes. Since CRTs have a charitable intent and do not have to pay capital gains, the full value of any assets is transferred to the trust (and eventually to the charity). Unlike IRAs or 401(k) plans, there are no limits on how much can be contributed.

Charitable Income Lead Trust (CLT)
The CLT reverses who receives income and who receives the assets when the creator of the trust dies. CLT flip-flops the parties involved. Charities become the income beneficiaries, receiving a steady stream of income during the owner's lifetime.  At the owner's death, named beneficiaries (often children) receive the bulk of the CLT's assets. The trust can be arranged in such a way that it can avoid all estate and gift taxes.

State and Federal tax law regulate income percentages and tax savings with charitable trusts.  It is possible and often recommended to use other estate planning tools along side the CRT or CLT.  Contact an attorney at Haas McNeil & Associates, P.A. to find out more.