Charitable trusts have long been a popular planning tool among donors and their advisors.
A charitable lead trust (CLT) first provides income to charity for a period of time, and then the trust assets are distributed back to the donor or to their heirs.
Depending on the type of CLT used, the benefits include:
- Income to charity today
- Immediate income tax deduction
- Reduction of estate tax
- Reduction of generation-skipping tax
- Transfer of assets to heirs
- Potential increase in trust asset value
- Return of trust assets to donor
Donor-advised funds can be named as the charitable beneficiary of a charitable lead trust, which provides the donor with added flexibility.
When assets flow from a charitable trust into a donor-advised fund, the donor and their family can decide over time which charities they wish to support. They can also support different charities from year to year. However, if they name specific charities as beneficiaries in the trust document, it can be complicated, expensive or even impossible to change them after the trust is created.
Naming an AEF donor-advised fund as the charitable beneficiary of a charitable trust adds further flexibility: in many cases, the family’s trusted financial advisor can administer the fund’s investments.
YOUR TRUSTED PARTNER IN PHILANTHROPY
American Endowment Foundation (AEF) is one of the nation’s largest independent donor-advised fund sponsors. AEF expands philanthropy by partnering with firms and advisors in the financial services industry, enabling more donors to create a significant charitable impact. To learn more about AEF’s resources for donors and financial advisors, or to open a donor-advised fund, visit aefonline.org or call us at 1-888-966-8170.