When going through the estate planning process, Ohio residents often consider charitable giving. The concept is beneficial for several reasons. First, it is a morally benevolent thing to do. In addition, for those with larger estates, the charitable deduction can help descendants save on estate taxes. For those considering charitable giving as a part of their plan, a charitable trust may be a wise option.
Most trusts place property in the hands of a trustee, who is then given the responsibility of distributing the property pursuant to the trust terms. In a regular trust, a specific beneficiary will be named. A specific remainderman will also be named in the event the beneficiary passes away before the trust ends.
A charitable trust is a little different. It need not name a specific person, organization or corporation as a beneficiary. Rather, the charitable trust identifies a charitable mission. For IRS purposes, the mission must be of ‘substantial social benefit”. The trustee must then distribute the property consistent with the stated purpose.
In order to prevent property retention in a trust for too long, there is a rule against perpetuities. Under this rule, a court can invalidate a trust that sets out to retain property for several generations. Because of the policy favoring charitable purposes, however, it does not normally apply to charitable trusts.
In addition, a legal concept called Cy Pres is applied to charitable trusts. Under this doctrine, a court may amend the trust due to a change in circumstances. If a charitable organization is no longer in existence, the court can permit changing the beneficiary to another organization that is consistent with the stated charitable purpose.
Those seeking charitable giving through their estate may hire an estate planning attorney. With a properly drafted estate plan, the wishes of the client might have a better probability of being met.