B.R. Chamberlain Foundation
"Inspiring a New Generation of Giving" 


How a Charitable Lead Trust Works

A charitable lead trust is a trust that pays annually a specified annuity or unitrust amount to one or more charitable beneficiaries for a specified term of years or for the life of a named individual or lives of certain named individuals. Upon termination of the annuity or unitrust period, the remainder interest passes to, or for the benefit of, one or more noncharitable beneficiaries.

How a Charitable Remainder Trust Works

Gifts to a Charitable Remainder Trust can be made in cash, but more often consist of highly appreciated stock, real estate or a closely held business interest. In exchange for a charitable gift, the Charitable Remainder Trust pays income to the trust income beneficiary (usually you and your spouse as donors) for a fixed period or for life. At the end of the trust (which is usually your lifetime), the remaining assets pass to one or more of the charities you have chosen.

How a revocable living trust works during grantor’s life

A living trust, also known as a Revocable Living Trust or a Family Trust is a legal document that holds title or ownership to your real property and assets. When you create a Revocable Living Trust you transfer ownership of your assets to the trust. Transferring assets is typically called "funding." When you transfer title you DO NOT relinquish any control. You can still buy, sell, borrow or transfer.

How a revocable living trust works upon grantor’s death

After you pass away, your successor trustee or co-trustee will have the same responsibilities an executor would have if you would have prepared a will. However, since your trustee does not have to report to a probate court everything can be done more efficiently and privately.

Credit Shelter Trust

If you are married and your combined estate exceeds the federal estate tax exemption, then a credit shelter trust could reduce your inheritance taxes. With a credit shelter trust, each spouse can use their full estate tax exemption, which could effectively double the exemption.

For example, consider a couple with $3,000,000 in total assets who wants to leave their property to each other if one should pass away. Upon the death of the first spouse, all property left to the surviving spouse passes tax-free. However, this leaves the surviving spouse's estate at $3,000,000. When the second spouse passes away, tax would have to be paid on the amount over the exemption ($1,000,000 taxed at a maximum marginal rate of 35% in 2007).

Qualified Terminable Interest Property (QTIP) Trust

A type of trust that enables the grantor to provide for a surviving spouse and also to maintain control of how the trust's assets are distributed once the surviving spouse has also died. Income, and sometimes principal, generated from the trust is given to the surviving spouse to ensure that he or she is taken care of for the rest of his or her life.

How a domestic self-settled spendthrift trust works

With a spendthrift trust, the trustee is given discretion to make or not make distributions to beneficiaries. Because distributions are discretionary, beneficiaries are prevented from voluntarily or involuntarily transferring current or future rights in the trust. In other words, beneficiaries can't give away trust income or principal in advance of receiving it. One effect of such alienation language in a trust is that creditors of a trust beneficiary cannot claim that trust assets are assets of the beneficiary. Therefore, creditors cannot stake a claim against trust assets, but can only collect money that is actually distributed to the beneficiary.

How a dynasty trust works

In today's tax system, estate and gift taxes are levied every time assets change hands from one generation to the next. These dynasty trusts avoided those taxes by creating a second estate that could outlive most of the family members, and continue providing for future generations.

Dynasty trusts are long-term trusts created specifically for descendants of all generations. Dynasty trusts can survive 21 years beyond the death of the last beneficiary alive when the trust was written.

If you were setting one up today, and you had a 2 year-old grandchild, your dynasty trust could last well over 100 years. Long after you're gone, a dynasty trust can distribute income and principal exactly the way you would have wanted.

How a Donor Advised Fund (DAF) Works

A private fund administered by a third party and created for the purpose of managing charitable donations on behalf of an organization, family, or individual.

Donor advised funds offer the donor ease of administration, while still allowing him or her to maintain significant control over the placement and distribution of charitable gifts.

How a Private Family Foundation Works

A Private Family Foundation (PFF) is a separate entity, privately funded by you. It is created with the specific purpose of contributing to various charitable causes. The Foundation is managed by a trustee or executive director that oversees the Foundation's investments and distributes the Foundation's assets.

You can even appoint yourself as the trustee of your own Foundation. This way, you maintain control over the assets contained in the Foundation. Instead of making a one-time gift to a public charity (and losing control of that gift), you can monitor your favorite charities. If one non-profit changes its focus, or if a more meaningful cause comes along, you can reallocate your Foundation's support.