Charitable Trusts

charitable trust is a trust made for the benefit of specific charitable purposes. The donor of a charitable trust is the person who typically creates the trust. The donor places money or legal ownership of property into the trust for the benefit of a beneficiary. In a charitable trust, the beneficiary is the organization that receives the money or title to the property. Beneficiaries are usually registered 501(c)(3) nonprofits. The organizations can be in the state of California or national nonprofits. Once the donor passes away, the charity receives the property or money and can use it for its own purposes.

When a charitable trust is created, the trust is usually irrevocable. Although there are a few exceptions, irrevocable trusts mean that the donor cannot change their mind about the trust later. Once the property is in the trust, it stays there until the donor passes away.

California Charitable Trust Attorneys

If you would like more information on California charitable trusts, speak with the qualified estate planning attorneys at Botti & Morison Estate Planning Attorneys, Ltd. Our lawyers have over 90 years of combined experience assisting families in every phase of the estate planning process including how to properly set up effective charitable trusts. We understand the important role charitable giving plays for many of our clients.

Allow us to help you navigate the process. Call Botti & Morison Estate Planning Attorneys, Ltd. today at (877) 585-1885 to set up your first consultation.

Botti & Morison Estate Planning Attorneys, Ltd. accepts clients throughout California including Ventura County, Los Angeles County, San Luis Obispo County, Kern County, and Santa Barbara County.

Back to top

Information Center

Back to top

Benefits Of A Charitable Trust

There are numerous benefits for both donors and beneficiaries in charitable trusts. Below are examples.

Tax Benefits

Charitable trusts have tax benefits for the donor, the donor’s heirs, and the selected organizations. Tax benefits are applied differently depending on the type of charitable trust created. Generally, charities benefit because they are exempt from paying most taxes. Donors benefit by receiving an income tax reduction in the tax year the donation was made. Donors’ families (or other named beneficiaries) benefit by paying less in gift and estate taxes.

Avoid Probate And Prevent Family Disputes

When a loved one dies, the probate process is one of the most stressful experiences for family members. Court intervention is usually required in this process, especially in high-conflict situations. With a charitable trust, families can avoid probate for the assets placed in the trust. Placing the assets in a trust can avoid stress, time, and excess money spent in the court’s probate system.

Similarly, high net-worth individuals may have children, grandchildren, siblings, and friends who might feel slighted if they believe they have been forgotten or treated unfairly. Heirs of those estates can spend months or years fighting in court, often at the expense of the assets in the estate. When donors create charitable trusts, they prevent family disputes in two ways. First, the charitable trust avoids the opportunity to argue in probate. Second, there can be a greater sense of fairness among heirs since no heir gets the assets in the charitable trust.

Personal Satisfaction

Often, the biggest reason for creating a charitable trust is the positive feelings and personal satisfaction of giving to a favorite charity. Whether the chosen charity is new or well-established, donors often report feeling optimistic about the future when they know they have left a part of their legacy to a charity.

Back to top

Types Of Charitable Trusts

Charitable trusts can be created in a few different ways. Generally speaking, there are two types of charitable trusts — charitable remainder trusts and charitable lead trusts. Each trust has distinct tax benefits.

Charitable Remainder Trust

In this trust, a donor identifies assets to go into the trust while the donor is living. The donor keeps any income generated from the donation. Once the donor passes away, the property becomes the charity’s property, and the organization benefits from the asset and the income it generates. Property in the trust can include personal property, real property (homes and land), and stocks and bonds.

For example, consider a donor with a rare artwork collection worth $500,000. The donor can place the artwork into a charitable trust and list their favorite art museum as the beneficiary. The art museum would take the artwork for its use while the donor is still living, but the donor would keep any income generated from the artwork’s presentation at the museum. Once the donor passes away, the art museum immediately takes possession of the artwork and keeps any income generated by its feature at the museum.

Charitable remainder trusts can also help family members live comfortably after the donor passes away. In an annuity trust, a different person, usually a spouse, can receive the income generated by the property for a set time or the rest of the spouse’s life. Once the period expires or the spouse dies, the property and any future income belong to the charity. No matter how the trust is set up, charitable remainder trusts can reduce estate and gift taxes for beneficiaries who ultimately benefit from the donor’s estate, including family and friends.

Charitable Lead Trust

In a charitable lead trust, the identified property remains with the donor’s estate in these trusts. However, a charity will receive any income generated on the property for a set time when the donor passes away. Once that period expires, the property and any money it generates are immediately transferred to another beneficiary. For example, perhaps a donor owns a large, historic mansion that generates income from tours and weddings. In a lead trust, the donor could name a local university as a beneficiary and donate the income generated to the university for ten years. After that time, the mansion and its income pass to a different beneficiary the donor has selected.

Charitable lead trusts can begin as trusts while the donor is still alive, or they can be created in a will. Either way, the non-charitable beneficiaries, such as family members or friends, can save significant amounts of money on the estate, gift, or income taxes.

Speaking with an experienced estate planning attorney is the best way to determine which trust is most appropriate for a particular case.

Back to top

Additional Resources

Guide for Charities | California Department of Attorney General – The California Attorney General’s website provides resources for those interested in leaving part of their estate to a charity. The public can learn the legal definition of charities, learn more about California charity laws, receive assistance in evaluating a charity, and find answers to frequently asked questions.

California Laws | Supervision of Trustees and Fundraisers for Charitable Purposes Act – The State of California has laws guiding donations to charitable organizations. Although an estate planning attorney is in the best position to answer questions, interested individuals can find information about the laws in California.

Back to top

Bakersfield Charitable Trust Lawyers | Kern County, CA

If you would like to incorporate philanthropy into your estate planning, contact the knowledgeable estate planning attorneys at Botti & Morison Estate Planning Attorneys, Ltd.. Charitable gifting not only supports an organization close to your heart but also enables you to reap the tax benefits available.

Chris Botti and Paul Morison at Botti & Morison Estate Planning Attorneys, Ltd. have practiced estate planning for decades and can help you craft an effective charitable trust. Set up your first confidential consultation at Botti & Morison Estate Planning Attorneys, Ltd. by calling our offices at (877) 585-1885.

Botti & Morison Estate Planning Attorneys, Ltd. assists clients throughout the state of California including Ventura, Westlake Village, San Luis Obispo, Bakersfield, Valencia, and Santa Barbara.

Back to top