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Ask a Trust Officer: Split-interest charitable trusts

January 27, 2021

DEAR TRUST OFFICER:  I’m going to make a major charitable gift to my alma mater, but I also need to provide for my heirs. How can I balance these competing interests?


DEAR BUDDING: Explore a split-interest charitable trust.  Such a trust has both private and charitable beneficiaries (hence, the “split”). You contribute assets to an irrevocable trust, either for a set number of years, a beneficiary’s lifetime, or the lifetimes of more than one beneficiary.  The private beneficiaries receive trust distributions that are defined either as a specific dollar amount annually (an “annuity trust”) or a specified percentage of the trust’s value, determined annually (a “unitrust”).  In periods of inflation, growth in asset values will lead to growing distributions to beneficiaries. In periods of economic uncertainty, on the other hand, the annuity trust alternative gives beneficiaries the peace of mind of a set number of dollars coming in, regardless of what the markets do.

When the trust terminates, the assets pass to a designated charity, your alma mater.  This facet of the plan gives rise to income, gift and estate tax charitable deductions, stretching the financial protection of your resources.  A charitable remainder trust may be established during life or in your will.  It can be especially appropriate if you wish to diversify a portfolio with highly appreciated assets.

Be sure to consult with your tax advisors before making any irrevocable decisions.

Do you have a question concerning wealth management or trusts?  Please contact Centier Financial Partners at 219-755-6110.

(January 2021)
© 2021 M.A. Co.  All rights reserved.


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