How Does a Charitable Trust Work

Ever wondered about the institute of charitable trust? You can find many articles on this topic, but they are for the most part written in a pretty complex language. Let’s try to take a look at it through layman’s eyes. So, what is it? What’s the purpose? What are its benefits, disadvantages? Does it make sense for you?

What Is It?

Simplest way to put it, it is a financial arrangement. You set up a third party entity, to which you donate something of value. This donation then becomes the the property of the third party. Furthermore, you can set up various time and event based conditions. Once these conditions occur, the property is conveyed to beneficiaries you designated when you were setting up the trust. In case of a charitable trust, the beneficiary must be a charity. This is what differentiates it from an ordinary trust. And that’s why it carries with it a number of tax benefits.


To sign over your estate onto others while you are still alive. You put your assets into a charitable trust, but still can maintain certain control and decide whether all or only some of the earned interest goes to a designated charity or to you. By establishing a charitable trust you can actually save on income tax or capital gains tax and this money can then be used to make other forms of investment, such as a life insurance. But we’ll talk about that in mor detail in a later article.

When Does a Charitable Trust Make Sense?


If you are a person that likes to give a lot, then a charitable trust makes sense at any time. However, if you are looking to make charitable donations and also get the tax benefits, then a trust makes sense mainly if you own a lot of assets. To give an example, probably the most famous charitable trust in the world is the Bill and Melinda Gates Foundation Trust, which is set to expire 50 years after the owners’ deaths. No, you don’t need to be one of the richest people in the world, but you do need to have at least hundreds of thousands of dollars in assets you intend to donate. Just to give you a rough idea.

If you’d like more information about the options available to you through a charitable trust and life insurance, then contact us and let’s set up a time to talk. You can also start by filling out this form for a free life insurance quote.

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