Charitable Trust Definition

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Definition Of Charitable Trust:

charitable trust A legal arrangement whereby real or personal property is placed in trust for the benefit of a charity.
A charitable trust can produce substantial tax benefits for an individual and his or her estate.What type of person is most likely to benefit from establishing a charitable trust?Wholly charitable trusts (trusts that distribute only to charity) may benefit the donor by creating an income, gift, or estate tax charitable deduction for the property transferred to the trust while allowing the donor to control the disposition (by the terms of the trust or, possibly, as trustee) of the trust property for charitable purposes. [See also PRIVATE FOUNDATION.] Thus, for example, an individual with charitable intentions who has significant income this year and who could benefit from a charitable deduction could establish and fund a wholly charitable trust during the year and, in future years, direct the income and principal of the trust to public charities. Such trusts are typically exempt organizations for income tax purposes and subject to significant regulation under the federal tax laws and may also be regulated by state agencies supervising charitable activitiesSome trusts that have charitable beneficiaries also have noncharitable beneficiaries. The common forms of these are the charitable remainder annuity trust, the charitable remainder unitrust, the charitable lead annuity trust, and the charitable lead unitrust, and each has provisions prescribed by the Internal Revenue Code, federal tax regulations, and IRS publications. These trusts permit a donor a means to provide for both charity and individual beneficiaries, and the value of the charitable interest will also qualify for the gift and estate tax charitable deduction, and may also provide the donor with an income tax charitable deduction. Charitable remainder trusts are exempt from income tax and allow income tax planning for the disposition of highly appreciated assets.Stephen F. Lappert, Partner, Trusts and Estates Department, Carter Ledyard & Milburn LLP, New York, NY.

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