Charitable Living Trusts For Income Stream CreationCharitable Living Trusts work as the means for creation of current income stream for you, and a future asset bearer for your legal heirs and successors, or a charity. It also helps to transfer your property to your heirs and successor on your death. On the other hand, when you transfer your asset to a charitable trust, they are removed both from your probate estate and your taxable estate. There are various types of charitable trusts. There is charitable lead trust, where the current income from the trust is distributed to the charity for a fixed number of years. The charitable remainder trust, where you and your beneficiaries receive current income from the trust, and on your death, the remainder of the assets passes over to your heirs. The credit shelter trust enables married couples to use each spouse's applicable exclusion from estate tax that has been set to $2 million as from 2006. There are also the irrevocable life insurance trusts, where the holder of the policy is the trust. However, the most interesting type of charitable trusts is the charitable living trust. Broadly speaking, charitable living trusts could be a revocable living trust, or an irrevocable living trust. A revocable charitable living trust can be altered anytime during your life. Beneficiaries can be changed, or the trust may be discontinued. The entire process is at your discretion, since you maintain the control over the assets within the trust. The property and assets remain a part of your taxable assets. An irrevocable charitable living trust is one that cannot be altered at any time after establishment. Assets under the trust can be exempted from your taxable income in some cases. However you cannot generally have rights to get the money back, or control the trust. Irrevocable living trusts are generally transferred by way of gift. But careful planning is required to avoid payment of huge gift taxes in case of large properties. A revocable charitable living trust can be useful to avoid probate of assets, which can help in transfer of the wealth to beneficiaries. On the other hand an irrevocable charitable living trust also helps in both the above cases, and also helps reducing estate taxes. Revocable living trusts, known as RLT in short, are created during the lifetime of the grantor, and are alterable, while irrevocable living trusts are not. It is easy to manage and dispose of assets following the grantor's death in case of RLT, having numerous advantages of protecting and managing the assets. However, despite all these advantages, the planning tool may not benefit everyone. They will not remove assets from the grantor's gross estate for federal estate tax purposes. They cannot also protect the property from the creditors of the grantor. Therefore, an RLT should be established only after due consultation with experts in the field, and should be decided upon after a proper consultation of its legal implications. Tax concessions, in case of a revocable charitable living trust, include income tax, gift tax, estate tax, and generation skipping tax. Advantages of an irrevocable charitable living trust are that, you observe the trustee in action, avoid probate and court costs, save some fees and taxes on charity, income tax deduction in case of irrevocable charitable remainder trusts, and can conveniently pass the property to charity of your choice. |