What if you could support the Montana Community Foundation and our work, provide for your heirs and reduce your taxes with one gift? With charitable trusts, you can do all of it. This guide offers helpful information on two popular types of charitable trusts.
There are two types of charitable trusts—a charitable remainder trust and a charitable lead trust. Both types of trusts split the assets between a charitable and non-charitable beneficiary. The main difference between a charitable remainder trust and a charitable lead trust is when the endowments at MCF designated as the beneficiary receive your gift.
Remainder trust: Endowments at MCF receive the remainder after your lifetime or a term of years.
Lead trust: Endowments at MCF receive benefit from the gift first, with the remainder going to individuals you choose.
The following few pages have detailed information on both types of trusts. Keep reading to uncover which type may be right for you.
With a charitable remainder trust, you receive a stream of income for your lifetime or a set term of up to 20 years. The income may be greater than what the assets currently yield. If you wish, your spouse or another individual can receive an income from the trust after your lifetime. At the end of the trust term, the remaining balance goes to the Montana Community Foundation for the endowment fund(s) you selected as the beneficiary of the gift.
Use this chart to help you choose from two basic types of charitable remainder trusts.
|Charitable Remainder Unitrust or Annuity Trust:
Which Is Best for You?
|Gift Plan||Charitable Remainder Annuity Trust||Charitable Remainder Unitrust|
|Payments||You receive fixed income for life or a term of years||You receive variable income (based on the trust’s value each year) for life or a term of years|
|Donor Profile||Best for those older than age 70 seeking to make a substantial gift and receive a higher income for a short period of time||Best for those older than age 55 seeking to make a substantial gift|
|Funding||Cash or securities, typically $100,000 or more||Cash, securities or other assets, typically $100,000 or more|
With a charitable lead trust you transfer cash or assets, which are appreciating in value, into a trust with the intention of supporting one or more endowments at MCF, then returning the remaining assets to your family.
The major benefit of creating a lead trust is in transferring assets to family members at very little gift or estate tax costs. You could potentially pay a relatively small gift tax for eventually transferring a large amount of assets to your children. This type of gift provides you with a gift tax deduction, not an income tax deduction.
Types of Payments
The trustee makes payments from the trust to the selected charity or charities as either a fixed annuity payment or a percentage of the trust.
An annuity payment: With this type of payment, the selected endowment fund at MCF receives the same amount annually whether trust assets appreciate or depreciate. If the trust income is insufficient, the trustee uses principal to make up the difference.
A unitrust payment: With this option, we receive a variable amount based on a specified percentage of the fair market value of the trust assets, valued annually. You set the percentage upon creating the trust. The payments fluctuate with trust appreciation or depreciation. If the trust income is insufficient, the trustee uses principal to make up the difference.
Information contained herein was accurate at the time of posting. The information on this website is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in any examples are for illustrative purposes only. References to tax rates include federal taxes only and are subject to change. State law may further impact your individual results. California residents: Annuities are subject to regulation by the State of California. Payments under such agreements, however, are not protected or otherwise guaranteed by any government agency or the California Life and Health Insurance Guarantee Association. Oklahoma residents: A charitable gift annuity is not regulated by the Oklahoma Insurance Department and is not protected by a guaranty association affiliated with the Oklahoma Insurance Department. South Dakota residents: Charitable gift annuities are not regulated by and are not under the jurisdiction of the South Dakota Division of Insurance.