What are some innovative and creative ways to use a charitable trust?

1 Split-interest trusts

A split-interest trust is a type of charitable trust that allows you to divide the income and remainder interests between charitable and non-charitable beneficiaries. For example, you can create a charitable remainder trust (CRT) that pays you or your loved ones a fixed or variable income for life or a term of years, and then distributes the remaining assets to one or more charities of your choice. Alternatively, you can create a charitable lead trust (CLT) that pays a fixed or variable amount to one or more charities for a specified period, and then passes the remaining assets to you or your heirs. Both types of trusts can help you avoid capital gains tax, reduce estate tax, and generate an income tax deduction.

2 Donor-advised funds

A donor-advised fund (DAF) is a type of charitable account that allows you to make irrevocable contributions of cash, securities, or other assets, and then recommend grants to qualified charities over time. You can also invest the funds in the account and grow them tax-free. A DAF can be a convenient and flexible way to manage your charitable giving, as you can choose when and how much to donate, and support multiple causes with one account. You can also involve your family members in the grantmaking process, and create a legacy of giving.

3 Charitable gift annuities

A charitable gift annuity (CGA) is a contract between you and a charity, where you make a one-time donation of cash or property, and in return, the charity pays you a fixed income for life. The income amount depends on your age, the donation amount, and the annuity rate. A CGA can provide you with a steady and secure income stream, as well as an immediate income tax deduction and a partial bypass of capital gains tax. You can also designate a second beneficiary to receive the income after your death, or defer the income start date to increase the payout and deduction.

4 Life insurance policies

A life insurance policy can be a valuable asset to donate to a charity, as it can create a large impact with a relatively small cost. You can either name a charity as the beneficiary of your existing policy, or transfer the ownership of the policy to the charity. The former option allows you to retain control over the policy and change the beneficiary if needed, but does not provide any tax benefits. The latter option allows you to claim an income tax deduction for the fair market value or the premiums paid, whichever is less, and also reduces your estate tax liability.

5 Real estate gifts

A real estate gift is a donation of land, buildings, or other property to a charity. You can either donate the property outright, or retain a life estate that allows you to use the property for the rest of your life. A real estate gift can help you avoid capital gains tax, generate an income tax deduction, and reduce your estate tax. You can also donate a partial interest in the property, such as a remainder interest, a conservation easement, or a bargain sale.

6 Social impact bonds

A social impact bond (SIB) is a type of contract that involves a private investor, a government agency, and a social service provider. The investor funds a social program that aims to achieve certain outcomes, such as reducing recidivism, improving health, or increasing employment. The government agency agrees to pay the investor a return based on the performance of the program. The social service provider delivers the program to the target population. A SIB can be a way for you to support innovative and effective solutions to social problems, while also earning a financial return if the program succeeds.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?