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Charitable remainder trusts and charitable lead trusts


When it comes to estate planning, there are many ways to preserve your assets and plan for your legacy and the care of your loved ones. However, for many of those with means, merely preserving wealth and providing for those fortunate enough to be considered family is not enough. Often, finding ways to use your means for the greater charitable cause is also a vital component of your goals and legacy. Establishing a charitable trust has many advantages that allow the creator of the trust to preserve wealth through tax advantages while designating resources for the use of a cause he or she holds dear.

Charitable trusts are classified as either “charitable remainder trusts” or “Charitable lead trusts.” With a charitable remainder trust, an individual of means designates specific assets, usually those with particularly high appreciation values or non-income producing assets, to go to the trust. This asset makes an at-least-annual payout to the creator of the trust or another designated non-charitable beneficiary. This arrangement continues for the term of the trust, which can be the life of the trust creator or another beneficiary, or an arbitrary term up to 20 years in length. Once the term has expired, whatever assets remain in the trust, including any appreciated value, go to the designated charity or charities. This is an ideal solution for those with highly appreciated assets they wish to sell within a trust structure to avoid capital gains taxation while fetching full market value.


Contrastingly, a charitable lead trust offers a similar yet opposite benefit structure. A charitable lead trust makes an at-least-annual payout to a charitable organization for the duration of the trust’s term. Once the trust has expired, the remaining assets go to a non-charitable beneficiary, such as a family member or beneficiary of the trust creator.


Deciding which structure of trust is best for meeting your financial planning and charitable goals is an important decision for anyone choosing how to best serve their assets. The guidance of an experienced estate planning attorney can help ensure your goals are met and your charitable desires are achieved in the most efficient, effective way.

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Dunlap & Seeger, P.A.
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Rochester, MN 55904

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