A charitable trust is an estate planning tool that can help you minimize taxes, create a legacy and support meaningful causes. You can donate to a nonprofit, church, college and other types of charitable organizations by setting up a charitable trust.

You may consider a charitable trust if you want to give generous amounts and enjoy a significant tax break. Here is an explanation of the two most common types of charitable trusts and what they can help you accomplish.

Charitable remainder trust

 With a remainder trust, you transfer the property you wish to donate to a charity with IRS approval. You appoint the charitable organization as the trustee, which means the organization manages or invests the property to generate income. Depending on how you set up the trust, you can choose to receive a portion of this income yourself or give it to a beneficiary. You can specify the payment period when creating the trust document. Then, once the period ends or you pass away, the remaining property goes to the charitable organization.

Charitable lead trust

 A charitable lead trust allows you to maintain control over the property as the donor. You get to make donations to a charity during your lifetime. Any interest that the trust assets produce either go to the charity, your beneficiaries or both. Then, when the term ends or you pass away, the remaining assets go to you or your beneficiaries instead of the charity.

Tax advantages

 Creating either type of charitable trust can give relieve you of tax burdens because you can use assets like stocks to fund the trust. Rather than paying massive estate or capital gains taxes, you can give money to charity and enjoy an income tax deduction.

Establishing a charitable trust is a great way to protect your wealth while also funding charities that need your help.