How to Create a Charitable Trust

A charitable trust is a legal entity created to support a particular cause. Charitable trusts allow givers to set aside money for particular causes or organizations, while retaining control over the investments and the distribution of funds. The donor gets tax deductions for his donation. This form of philanthropy is well-suited for an investor who wants to donate a significant ownership stake while retaining control over the company.

Difficulty:

Moderate

Instructions

1. Consult your lawyer and accountant to determine if a charitable trust is the best way to achieve your philanthropic goals. Other options include a bequest, gift annuity or a standard donation.

2. Calculate how much money you are willing and able to put into a charitable trust.

3. Decide on the beneficiaries of your trust and how often the money will be distributed. You can also determine if you trust will only give away income in order to maintain a constant amount of principal. Otherwise, you can increase the amount of giving but the trust will give itself out of existence.

4. Draw up the trust document and bills of sale for all of the property that you are transferring to the trust. A lawyer is helpful, if not essential, when completing this paperwork.

5. Choose how to invest the money in the trust. You will be able to make this decision until your death.

Tips & Warnings

• A Charitable Residual Trust allows you to donate money and take a tax deduction. It differs in that you are able to earn income from the trust until your death.