More Than Plenty? Charitable Trust!

Jan 28, 2026

If you and your family have accumulated more assets than you are likely to need, establishing a charitable trust is a terrific way to designate assets for causes and organizations that you care deeply about. Charitable trusts are relatively easy to establish, and far less complicated than, say, operating a family foundation. Read on for an overview from estate planning professionals, and learn about the difference between charitable remainder trusts and charitable lead trusts.

Designating Funds for Causes and Organizations

Generosity is the ultimate “pay it forward” family value, and establishing a charitable trust can be a wonderful way to involve loved ones in thoughtfully sharing wealth. As a starting point, it’s wise for everyone in the family to understand trust basics. Simply put, a trust is a legal arrangement where an individual (the grantor or settlor) transfers assets to another party (the trustee) to be held and utilized for the benefit of a third party (the beneficiary). The instructions written in the trust agreement guide the trustee as to how the funds placed in a trust should be distributed.

Trusts fall into two broad categories: revocable and irrevocable. A charity can be named as a beneficiary of a revocable trust. In this case, designated assets go directly to the charity upon the death of the grantor, by-passing the public probate process and its potential for delays. However, since the assets in a revocable trust are controlled by the grantor (until death), and beneficiary designations and assets can be changed at any time, revocable trusts do not provide the same legal structure, asset protection, and tax benefits as irrevocable trusts. With an irrevocable trust, because the grantor essentially gives up control of assets to the trustee, the assets are technically no longer part of the grantor’s estate. As attorneys at Phelps LaClair explain:

A charitable trust is a type of irrevocable trust designed specifically for charitable giving. The beneficiary of a charitable trust is the organization of your choice, but you can also name other non-charitable beneficiaries who can benefit from the trust. Since charitable trusts are irrevocable, you cannot remove assets from the trust or change the beneficiary. However, unlike revocable trusts, the assets in an irrevocable trust are safe from lawsuits and creditors.

At the Hinckley Allen law practice, Katie McDonough notes that it is relatively easy to work with an estate planning attorney to establish a charitable trust, and in doing so, choose whether a charitable remainder trust, or charitable lead trust best addresses the goals and circumstances of the family establishing the trust:

…Work with your estate planning lawyer to name a tax-exempt non-profit as a beneficiary of your estate plan, and your estate will be able to take a deduction for that gift when the time comes to pay estate taxes. Charitable remainder trusts allow clients to set aside assets for a charity while also generating income during life. Charitable lead trusts allow clients to make annual gifts to a non-profit during life while leaving the assets to a beneficiary of the donor’s choice (including to family) at death … .Charitable trusts enjoy the protection of oversight by the Attorney General. An organization or board cannot change the purpose or use of the funds in your charitable trust without going through a special process…. Therefore, in addition to its simplicity, a charitable trust is the best option to ensure that your wishes are carried out to the letter for as long as the trust exists.

Trustee and Trustee Bonds?

When creating a trust, the grantor names a trustee to administer the assets in accordance with the plans specified in the trust agreement. When choosing a trustee, families often designate a loved one or friend. An independent fiduciary is also an option. Keep in mind that the trustee role is not an honorary one. All trustees are fiduciaries: they are legally bound to the highest duty of care in executing their responsibilities. In fact, given the significant duties undertaken by trustees, the trust agreement may require procurement of a trustee bond.

A trustee bond is a type of fiduciary bond that protects the interests of the trust and beneficiaries by guaranteeing the faithful performance of a trustee in accordance with the law. Essentially, a trustee bond protects the beneficiaries from administrative failure or misconduct on the part of the trustee. Specifically, a trustee bond is a formal agreement involving three parties:

The Principal (Trustee): The person responsible for managing the trust.
The Obligee (Beneficiaries): The individuals whose interests are being protected.
The Surety (Bond Company): The entity providing a financial guarantee that the trustee will perform their duties faithfully.

In the event a trustee fails to fulfill their duties, a trustee bond ensures the beneficiaries are financially compensated. As a leading national provider of all types of fiduciary bonds, Colonial Surety Company makes it easy and efficient to obtain a trustee bond. Just get a quote online, fill out the information, and enter a payment method. The bond can be printed or e-filed from anywhere.

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Trust and Estate Law?

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