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Pooled Charitable Trusts and Tax Breaks

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What Is a Pooled Charitable Trust?

In the past, only the rich could benefit from the tax breaks of a charitable trust. Charitable trusts are traditionally valued at the minimum of $100,000. Now, thanks to the concept of a pooled charitable trust, people who want to contribute less can pool their money together to come up with the $100,000 donation.

So, instead of one person forming a charitable trust of $100,000, a group of people can form a charitable trust by each contributing $10,000, for example.

How Does a Pooled Trust Work?

As a donor, you do not need to set up the charitable trust; you merely need to find one that meets your needs. The charity or the investment company is the one that sets up the charitable trust and will accept donations in form of cash or securities. Then the donations are invested, and you will receive any income from the investment.

Charitable trusts tend to have donation requirements in which the threshold is much more than regular charitable donations. Some trust require you to donate at least $10,000 minimum and allows you to donate in $1,000 increments in the subsequent years.

What Tax Breaks Can I Get?

Like any other charitable donations, you will get a slight tax break. However, you cannot take the entire amount you donated as an income deduction because a charitable trust will yield you some income. Thus, any income you receive from your charitable trust donation will count as your own personal income.

Capital Gains Exemption

If you donate securities or property to a charitable trust, you may avoid paying the capital gains tax so long as you owned the securities for one year prior to donating them. And as a result, if the securities are high yielding, you will overall gain more income.

Consulting an Attorney

If you are considering obtaining a tax break from donating to a charitable trust, an estate lawyer can review your case with you. He will help you determine whether it makes sense for you to be part of a pool charitable trust.

Photo of page author Mabel Yee

, LegalMatch Legal Writer

Last Modified: 12-17-2014 03:18 PM PST

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