There are several reasons why many Maryland residents include trusts in their estate plans. Trusts provide individuals with more control over how their assets will be distributed after they pass away, and these versatile estate planning tools can also avoid the public and sometimes lengthy probate process. Charitable trusts are particularly popular because they allow individuals to transfer assets to their chosen beneficiaries or donate assets to charities, and they may also reduce or even eliminate estate taxes.
Charitable remainder trusts
There are two types of charitable trusts. Charitable remainder trusts are chosen by individuals who wish to transfer assets to their children or other beneficiaries. Charitable remainder trusts are structured to make annual distributions for a predetermined period of time. This period is commonly 10 years, but individuals can choose to make distributions for shorter or longer periods if they wish. When all of the annual distributions have been made, any assets remaining in the trust are distributed to a designated charitable beneficiary in a lump sum.
Charitable lead trusts
Charitable remainder trusts can provide a sizeable estate tax deduction, but charitable lead trusts provide even more attractive tax benefits. Like charitable remainder trusts, charitable lead trusts make annual distributions for a set period of time. These distributions are made to a charitable beneficiary, and any assets remaining in the trust after the last distribution has been made are distributed to a noncharitable beneficiary in a lump sum.
Helping others and lowering estate taxes
Individuals include charitable trusts in their estate plans so they can transfer assets to their beneficiaries, charities, family foundations or donor-advised funds while reducing or eliminating estate taxes. Charitable trusts make annual distributions for a designated period of time, and any assets they contain after the final distribution has been made are distributed as a lump sum.