Benefits Of Establishing A Charitable Trust Fund

Benefits Of Establishing A Charitable Trust Fund

By establishing a charitable trust, citizens of the United States are in a position where they can reduce their constitutional obligation to pay estate taxes almost entirely, and leave their estate intact to be passed on to which they see fit, and not the US government. This relatively recent breakthrough precludes the need to pay capital gains tax on property or assets disposed of as well as reducing the need to pay income tax on the same asset disposal, as long as the trust is established during the same financial year.

The Inland Revenue demand that the capital or assets included in the charitable trust be funneled into charities and/or foundations that are recognized by them, irrespective if they are situated in the United States or anywhere else in the World.

The establishment of a charitable trust provides a double sided benefit for its founders. They can enjoy both the prestige and satisfaction of seeing the money that they have worked hard for and taxed their ingenuity to protect go towards a charity or foundation that they care strongly about and where they can see and feel the direct result of their generosity. There are thousands of these charitable trusts being established every month. Some of them are surprisingly small and some of them are very large. Probably the largest charitable trust ever to be established is that founded by the founder of Microsoft, Bill Gates and joined by the legendary Warren Buffett, which today has a joint asset value running into the tens of billions of dollars. The extent of such a trust extends all borders and reaches out to the weak and hungry in every corner of the globe.

What these highly talented and successful people realized and Buffett once said, is that you can only eat three meals a day, drive one car at a time and if you left your loved ones well provided for, then there was not a lot more that you could do with the money. With these two gentlemen with a combined fortune of around ninety billion dollars there was a lot of money left over, and a lot of good that could be done with it. They fully realized that once the money was invested in the trust it became a property of it and could never be refunded. The fund is run by a trustee, who is usually a bank official or a lawyer. Dependant on the size of the fund, a full time trustee will be appointed. This trustee enjoys full responsibility in distributing the funds in the trust, at the bequest of the donators. The good people who have established the trust cannot be actively involved in the distribution of its assets through US court legislation.

Dependant on the size of the charitable trust and the needs of the people who established it, the trustee can pay a small tax paid stipend from the trust. However the founder of the trust has to ensure that this fact is written clearly in the trust declaration before or during the trust’s establishment.

In most cases, the charitable trust fund is established and funded form sales of property which carry a fairly heavy capital gains tax or stocks and shares. If the person or persons selling off these assets place all income from asset disposal in their charitable trust, within a financial year then they will be liable to pay capital gains tax on the sale or sales of their assets. Once a charitable trust has been established, the founder can continue to increase its asset value. However they will not be allowed to remove any of the assets from the trust without being liable for fairly considerable tax levies.

Sensible planning of a charitable trust means that the founders can take care of themselves in a reasonable manner through drawing a stipend from the trust in their retirement years, as well as helping people less fortunate than themselves. The same wise and prudent people may well establish a living trust also, which will provide for their loved ones after they passed, as individuals cannot be benefactors of a charitable trust.

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