Creating an estate plan means that you need to start out by making a list of everyone you want to receive an inheritance from you when you pass away. While many people opt to leave their assets to their loved ones, there are some individuals who want to support a chosen charity.
One option that’s available for people who want to provide part of their estate to a charity of their choice is to establish a charitable trust. There are two types to choose from – charitable lead trust and charitable remainder trust.
Who gets benefits first?
The order that beneficiaries receive what they’re due depends on the type of charitable trust that’s established. In a charitable lead trust, the charity receives the first distribution. Once the charity has its portion of the trust, the other named beneficiaries receive what’s left.
In a charitable remainder trust, the named beneficiaries receive their portion of the trust first. The charity then gets whatever is left after the beneficiaries get their share. In some cases, these trusts are set up to give the beneficiaries the proceeds from the contents of the trust before the charity receives the actual assets within the trust.
Establishing a charitable trust is only one part of creating a comprehensive estate plan. Taking the time to get everything set up so it reflects your wishes is critical. It may behoove you to work with someone familiar with these matters so you can ensure that your beneficiaries have a clear plan to follow.