Charitable Gift Trusts

Making a gift to charity has double sided advantages. One you enjoy the pleasure of giving, of aiding the less fortunate or simply extending a helping hand to people to achieve a sporting or academic goal. In sudden cases where those who have the wherewithal to dig deep into their pockets, such as in the case of the Tsunami tragedy of late 2004, or Hurricane Katrina the following year, can stand up and be counted when there is a need for immediate and concrete assistance.

People, who regularly contribute to charity and in large sums, will have a charitable trust long ago. Many people who have smaller budgets that the have set aside for charitable deeds during their life time, should be aware that they to can form a charity trust of their own, and enjoy the tax benefits.

The charity foundation can be founded with liquid cash, stocks and bonds, or real estate. Any assets owned by the foundation would be sold of by the trustee, avoiding the payment of capital gains tax on the profits.

By establishing a charitable fund the donor is capable of estimating how much they would like to donate to a charity or charities of their choice in any given financial year. If the donor likes to be involved in the day to day running of fund they can do so. If they would like to set aside a portion of the fund every year to be able to help people out in an unforeseen situation such as natural disaster of personal tragedy, then they can organize the foundation funds so that there always some funds available for the unexpected. The only drawback is that if the funds are not distributed during that financial year, then there is a risk that income tax will need to be paid on the interest gained.

Charitable gift trusts have been around for a long time. They have become more popular over the last few years because of the flexibility and ease of management they provide. The tax advantages they provide come in a few directions. The first is that any contributions made to a registered charity are totally tax deductible. Any contributions in a given fiscal year are totally deductible against that year's taxable income. This generous gesture from the tax authorities enables a win/win situation for both would be donors and their charities that benefit. The charity or charities get the benefit of receiving the full sum intended, not one that had been seriously depleted by the donor having to pay tax on it.

If the donor even wishes to claim a percentage of his donation as unearned income during the time that the fund is operational, then they are entitled to do so. As long at this is clearly stated by the trustee when drawing up the fund, the donor can claim between 5% to 8% of the fund's annual profit.

If one the other hand the donor does not need or want to receive income from the fund during their lifetime, they also have the option of establishing the fund so that there loved ones can receive a percentage of the fund's profits after their passing.

There is no question that establishing a charitable gift trust offers many advantages to those who like to share the benefits of the fruits of their labors among others.