Many people who make charitable donations a regular part of their lives while living look for ways to continue their legacy of generosity after their deaths. In addition, arranging for charitable gifts after one's death can also be an important part of tax planning. Although trusts have many different potential purposes and uses, many people choose to use them to make bequests to organizations they wish to support.
A businessman from Detroit who died nearly forty years ago recently continued his history of giving with five significant gifts of over $2.5 million each to organizations he wanted to support, namely the American Lung Association, the Arthritis Foundation, United Way for Southeast Michigan, the American Heart Association and the Karmanos Cancer Institute. The man, who earned his money by founding and running the D.E. Machinery Company, used a trust in order to facilitate and effect these donations. The charitable organizations received these significant donations totaling $13 million after the last two of the original beneficiaries of the trust passed away in 2013. The trust used to effect these charitable gifts was a charitable remainder annuity trust.
As mentioned above, trusts have many different purposes beyond providing charitable donations after one's death. Many people take advantage of a trust as a way of protecting inheritance from taxes or probate fees or ensuring that vulnerable family members are adequately provided for responsibly. The trust most commonly used for this purpose is called an AB living trust, a marital trust or a credit shelter trust-all different names for the same kind of legal mechanism. This kind of trust has the benefits of enabling spouses to get the most benefit out of the federal estate tax exemption, allowing for the use of assets by a surviving spouse, and facilitating easy bequests to heirs.
In addition to that kind of marital trust and other types of marital trusts, a trust can be used to ensure that the deceased's wishes are carried out when he or she is no longer able to supervise financial matters. For example, a trust can aid in protecting an inheritance from being wasted by an irresponsible family member or supervising money to be used for the benefit of minors and young adults. In addition, trusts can help provide nursing home care and adequate care for special needs children.
Source: Detroit News, "Philanthropist gives $13M decades after death," Jennifer Chambers, March 20, 2015