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Charitable Trusts

Don Williams, Assistant Treasurer

Q: What is a charitable trust? How can it help you? How can it help the Chapel of the Cross?

A: With a charitable trust, you give investments or other property to a trustee (you can be the trustee). The trustee pays you income for life, or pays a percentage of the trust annually for life. When you die, the trust goes to the church.

Q: Do I get a charitable deduction for income tax?

A: Yes. You get an income tax deduction for the year in which you set up the trust. If you don't use all the deduction, it carries over for five years. For example: you are 75; in 2001 you put into the trust $100,000 in stock; you elect to receive 6% a year income. Your charitable deduction for 2001 is $56,000 and carries over if you don't use it all in 2001.

Q: If I put in appreciated stock and the trustee sells it, must a tax be paid on the capital gain?

A: No. You avoid the capital gains tax. The trust is a qualified charity; it does not pay tax.

Q: Can I have the income paid to others?

A: Yes. For example, the income can be paid to you and your spouse until you both die.

Q: Can I change the charity that receives the trust when I die?

A: Yes, you can.

Q: Can I add to the trust after it is set up?

A: Yes, and you receive an additional income tax deduction for the year in which you add to the trust.

Q: What does it cost?

A: You can expect to pay $800 - $1200 for legal work setting up the trust. These fees may also be income tax deductions.

Q: Are there fees for managing the trust?

A: If you manage it yourself, there are none. If you hire a bank or a financial professional, fees will be about 1 - 1.5% of the trust each year. Some brokers will manage a trust without charge.

Q: Can I cancel the trust and get my money back?

A: No. The trust is irrevocable. You or the persons you select can have only the life income. The trust must go to charity when the income beneficiary dies.

Q: How do I set up a charitable trust?

A: It is best to have an attorney who is experienced in trust work. When our parish is named as the charitable beneficiary, you may find an attorney who will do the work for less than the normal charge. Attorneys will probably discuss the matter with you without charge.

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