In Connecticut, if you’d like to maintain investment income and benefit one of your favorite charities, setting up a charitable trust can be an excellent way to complete both endeavors. Understanding the pros and cons will make you more informed about its benefits.
Charitable trust pros
One of the most significant benefits of giving to one of your favorite charities is the ability it provides for you to donate your money and receive a tax break. Another positive you can consider when weighing the pros and cons of using a charitable trust is the ability it gives you to spread the income tax deduction over five years.
You can also choose to receive the specified amount of income from your trust yearly. Otherwise, payments based on a percentage of the value of the property may be used. The charity will pay you and act as the trustee, managing the property to create income for you.
Charitable trust cons
Having the trust act as trustee can also be negative as you will transfer legal control of your property to the charity. Doing so means you won’t have any control over the assets you give to them. Knowing the cons of a charitable trust and how much they detract from the pros should be enlightening as you consider this option during estate planning.
Receiving beneficial tax treatment by using a charitable trust means it must be irrevocable. You will not be able to change your mind about the amount given once the process is finalized. Designating an income amount that you want to receive from your trust can also be a con as higher payments may reduce the income tax deduction. Making higher payments can also reduce principal, leaving little for the charity.
Deciding on setting up your charitable trust should be more efficient and straightforward when you understand how it could benefit you. You’ll want to carefully weigh the potential outcomes to determine if this type of estate planning tool is right for you.