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Charitable trusts provide tax benefits, flexibility and control

Establishing charitable trusts provides Illinois residents with a number of significant benefits. Charitable trusts can be important components of tax management and estate planning strategies, and they allow people to fulfill their philanthropic objectives while providing them with flexibility and control. Trusts can be set up to make charitable donations in the form of lump sums or income streams, and people are able to determine how and when these payments will be made.

There is more than one type of charitable trust. Assets that have great value or do not produce income are generally placed in charitable remainder trusts. These trusts make at least one payment to non-charitable beneficiaries each year, and whatever remains after a term of no longer than 20 years passes to the charitable beneficiaries. This arrangement is mirrored with a charitable lead trust. With this kind of arrangement, annual payments are made to charitable beneficiaries and non-charitable beneficiaries receive what remains when the trust ends.

The U.S. tax code encourages individuals to give to charity, and establishing charitable trusts provides several attractive tax benefits. It may take decades to distribute the assets placed into charitable trusts, but people are usually able to take an upfront income tax deduction as soon as they are funded. This type of trust can also reduce estate tax liability. This is because assets are generally no longer considered part of an estate for estate tax purposes once they have been placed into a charitable trust.

Attorneys with trust planning experience could suggest the use of charitable trusts to clients who wish to ease the tax burdens placed on their heirs while helping those less fortunate. Attorneys may also recommend incorporating trusts into estate plans to avoid the public scrutiny of the probate process.

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