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Charitable trusts are created when you, as the donor, provide assets to fund the trust. The assets are then managed by the charity that uses some or all of the interest gained for operations. There are two general types of charitable trust. A remainder trust operates for a set period of time, for example, it may be set to end twenty years after your death. Once the time has expired, all assets, including any interest or profit become the property of the charity.
A lead trust is different because the donor still controls the assets. Interest or profit may go to the charity, but may also be shared by the donor’s beneficiaries. When the trust expires, the assets, including interest and any retained earnings go to a party of the donor’s choice, usually the other beneficiaries or another heir.
In addition to the good feelings you get from helping out a good cause, there are some important tax considerations. You as the donor get a break on the value of the assets you contribute to fund the charity. For the trust, tax is only due on the revenue the trust produces. Your heirs will benefit by reduced estate taxes at your passing.
You should incorporate your charity, protecting yourself and the managers of the charity from personal liability. As with any other corporation, you need to register in your state, create by laws to run the corporation, select a board of directors and define their duties. You should also have a process for selecting new directors. In addition, once you have selected your unique corporate name, you need to have proper insurance, open business accounts and create a website for your newly minted charity. The legal and financial planning needed to properly set up your charity is an investment in its ability to meet the goals you envision.