You’ve probably heard a lot about charitable organizations and foundations, but perhaps you don’t know much about charitable trusts. Put in the simplest terms, a charitable trust is an irrevocable arrangement whereby one person gives real or personal property to another to be used for the benefit of a class of persons or the general public.
In the United States, charitable trusts come in two basic varieties: remainder trusts and lead trusts.
- Remainder trust: Assets are signed over to a charitable organization for a specific period of time that can be either a few years or many years after the death of the donor(s). After the specified period of time has elapsed, the assets become the property of the charity, along with any interest or profits that might have been generated. One example of a remainder trust is the Bill and Melinda Gates Foundation Trust, set to expire 50 years after the deaths of Bill and Melinda Gates. With more than $30 billion in assets it is currently the largest charitable trust in the world.
- Lead trust: The donor retains control over the trust properties rather than giving control to a charity. Interest from the trust’s assets can either go to the charity or be split between the charity and the donor’s beneficiaries. When the trust expires, the charity doesn’t gain control; rather, the trust property reverts back to a party of the donor’s choosing (usually heirs or designated beneficiaries).
Other countries also have charitable trusts, including the United Kingdom and India. Charitable trusts can provide significant tax breaks for donors, but they are also good for society. Here are five ways society benefits from charitable trusts:
- They save lives in crisis areas of the world. It’s not much of an exaggeration to speculate that the survival of much of the human race could at some point depend upon the work of charitable trusts. The aforementioned Gates Foundation oversees a diverse range of projects in high-poverty areas of the world, helping with programs to ensure access to clean water (an issue that is predicted to reach a true global crisis point within a few decades); vaccinations against deadly diseases; and famine relief.
- They provide disaster and war relief. The world’s weather and other natural events seem to be getting more extreme, and whether all of that is just part of a natural cycle or is due to human factors, the fact remains that we’re seeing more catastrophic floods, fires, earthquakes and tsunamis. And then there are “wars and rumors of wars.” All of these events are devastating to many thousands of people every year, and those who don’t lose their lives often lose everything but their lives. They desperately need help, and the Red Cross can’t do everything (in fact, it depends upon help from charitable trusts as well as from other sources). Organizations such as CVS Caremark Charitable Trust are there to lend a hand.
- They help people help themselves. “Give a man a fish and he eats for a day; teach a man to fish and he eats for a lifetime.” The Gates Foundation and other charitable trusts help people help themselves by overseeing a range of programs from micro-financing loans that help people in impoverished areas start small businesses, to sustainable agriculture programs.
- They support education. Even in the less impoverished areas of the world, charitable trusts add to the quality of life for millions of people of all ages. For instance, the Pew Charitable Trusts and MacArthur Foundations, as well as numerous other charitable organizations, have been funding quality (educational) television programming on PBS in the United States for decades.
- They support the arts. Some contend that once the basics of survival are covered, the arts are what make life worth living. Charitable trusts such as the J. Paul Getty Trust – worth more than $10 billion – fund arts programs all over the world. The Getty Trust also funds A.’s renowned Getty Museum.
No matter where the trust is established, it must fulfill certain legal requirements in order to qualify as a charitable trust. In the United States, for instance, the settlor (the person who is establishing the trust) must have a clear intention to create this type of trust. There must be a trustee to administer the trust, and the trust must consist of some type of property, known as res. The charitable purpose must be clearly defined, the class of persons (though not the individuals) included in the beneficiaries must be expressly designated, and the beneficiaries must actually receive the benefit. Similar requirements apply in the United Kingdom and elsewhere.
As may be evident, there is a lot of accountability with a charitable trust, as there should be. But if you have the assets and you want to contribute to the “greater good” in some tangible way, a charitable trust might be just the vehicle to consider. If you don’t have the assets, consider volunteering or applying for a paid position with a trust whose mission interests you.
Written by Daphne Holmes
Daphne is a writer from http://www.arrestrecords.com.
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