Over the course of the past forty days we’ve covered trusts from the A/B Trusts to the Personal Injury Trusts and everything in between.
Today we’re covering Private Trusts; these are Trusts created for the benefit of one or more private beneficiaries; they are not Trusts that are created for the benefit of the general public, to contribute to a charity, or for the advancement of any particular cause.
A Private Trust is a Trust where the beneficiary is private and non-charitable. This is opposed to a Charitable Trust, which has broad beneficiaries up to and including the general populace. Drawing a distinction between Private Trusts and Charitable Trusts, while seemingly obvious, is necessary because there are certain requirements and conditions that apply to one but not the other.
From a legal standpoint, In order to qualify as a Charitable Trust, the Trust must have as its object certain purposes such as providing widespread relief, alleviating poverty, forwarding a cause, providing education, or fulfilling a grand purpose of one sort or the other. Why Charitable Trusts are so explicit in their execution is because are endowed with special treatment under the law regarding their taxation.
A Private Trust is what a person would create if they wanted to leave a personal legacy; a Charitable Trust would be created to forward some cause and benefit the public. A Charitable Trust is an irrevocable trust established for charitable purposes. This type of trust has one or more charitable beneficiaries, and may be set up during a donor’s life, or as a part of a trust that activates upon death of the donor.
Charitable Trusts are established to both benefit a particular charity and to benefit the trust grantor as well. The benefit to a particular charity is obvious; they gain much-needed funds. The benefit to the grantor creating the trust is that they can lower the amount of estate taxes that the grantor will have to pay.
Like a Charitable Trust, if executed correctly with the help of a qualified attorney, a Private Trust can also entitle the grantor the opportunity to save substantially on taxes. Wonder if a Private Trust is right for you? Seek the assistance of a qualified estate-planning lawyer today.
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