If you have money to spare, you may want to secure your legacy by contributing to a charitable cause. Many charities would struggle to survive without the generous donations people make.
Two of the main ways you can do this are via a charitable lead trust or via a charitable remainder trust. Let’s examine the differences between them.
Charitable lead trusts
With a charitable lead trust, you can help the charity of your choice with donations for a finite amount of time — whether that’s for ten years, twenty years or even longer. It’s up to you to determine the time frame and how the annual payment will be calculated. The trust will then make payments to the charity for that stipulated timeframe. Once that point is reached, anything left in the trust will be distributed to your beneficiaries.
Charitable remainder trusts
These trusts work the other way around. First, they look after the beneficiaries you name. Then, when the limit you set is reached, they pass what is left (the remainder) to the charity you have named. So, you might decide to have the trust pay out annually to your grandchildren and, when the last of those beneficiaries has died, transfer the remaining assets in the trust to the local animal shelter. Or you might just give your child 20 years of payments, by which time they should be able to support themselves, at which point any money still in the trust goes to the junior sports team you used to coach.
Getting your estate plan right is crucial if you want it to work as you intend, so legal guidance is often a wise investment.