Accounts/Trusts Created By A Benefactor/Grantor

• Charitable Remainder Trust - Charity receives balance remaining when the trust terminates. Benefactor receives an income stream from the trust during its term. Either the benefactor and or a financial institution administers the account. Benefactor receives favorable income tax and estate tax benefits.
• Charitable Lead Trust - Charity receives an income stream from the account during its term. The remainder balance in the account is then paid to family or other heir-designated beneficiary. Either the benefactor and or a financial institution administers the account. Benefactor receives favorable income tax and estate tax benefits.
• Irrevocable or Trust Under Will – These are trusts that simply pay out 100% of the net income, or other defined amount per the trust document, to a named charity. Administered by a financial institution, individual trustees, or combination thereof. Different from Charitable Remainder and Lead Trusts in that the trust is usually, but does not have to be, funded at the benefactor death. Also, the benefactor does not receive as many tax benefits as are offered through Charitable Remainder and Charitable Lead Trusts.
• Charitable Gift Annuity - Assets (usually low cost basis securities) are given directly to the charity. The charity sells the assets, reinvests the proceeds into an income producing investment (annuity). The charity then remits periodic income to the benefactor for a specific term. Usually the charity administers the account. Can be relatively easy to establish, however, if the charity accepts too many Gift Annuity Accounts, it can quickly become inundated with administrative details.
• Private Family Foundation - Families who wish to maintain more control over the administration, investments, and especially decisions as to charitable distributions by the Foundation may choose to create a "Private Family Foundation". A trust document must be drafted and application for 501 C3 tax exempt status must be made and approved by the IRS and Secretary of State in which the Foundation is domiciled. The Foundation is also required to select a Board of Trustees and name Officers. There are ongoing tax reporting and compliance matters that must be adhered to. The Private Family Foundation may be advantageous to families with sizable estates ($5.0 million +) and primarily, for those in which the Grantor\Trustees want to maintain the highest level of decision making control.
• Charitable Fund Under The Greater Greenville Community Foundation (or similar Community "Operating" Foundation) - Benefactor establishes an "account" or "fund" under the Foundation's 501 C3 Tax Exempt “umbrella”. Benefactors then work in cooperation with the Foundation to make contributions to the charity or multiple charities as per a clearly defined purpose.
• Charitable Fund Through Charitable Giving Accounts At Charles Schwab & Co., Vanguard Investments, Fidelity Investments, etc. - Identical to a Community Foundation account or fund except assets are held and administered under the 501 C3 “umbrella” of the investment company.
• Life Insurance Policies - The insured designates either the charity himself/herself or a trust that benefits the charity as the beneficiary of his or her life insurance policy. Upon death, proceeds are paid to the charity or trust. There are no ongoing administrative costs unless a trust is part of the plan.
• Individual Retirement Accounts (IRA) - The owner of an IRA designates either the charity itself or a trust that benefits the charity as the beneficiary of his or her IRA account. The charity or trust receives the IRA proceeds, or distributions from a trust holding an IRA, upon death of the benefactor\account owner.

Account/Fund Established By The Charity

• Endowment Fund - Simply a separate account or pool of assets owned by the charity. Usually Bylaws prepared by an attorney pro bono govern the use of the funds. There is minimal record keeping and these accounts are fairly easy to establish. The charity's own tax ID number is used for reporting purposes.
• Charitable Fund (501 C3) Tax Exempt Account - Similar to the Endowment Fund above except this account is more complex. A separate tax ID number and corporate identity must be established. Usually more accounting and tax reporting is required. The benefit to this type fund is it clearly separates assets in the account from the charity's own assets and therefore, may entice more benefactors to give.

Estimated Costs

• Legal Costs for estate counsel seem to average $1,500 minimum plus $85 - $250 per hour.

After being established, ongoing trust accounts or funds must adhere to various administrative and investment duties.

• Administrative Duties consist of record keeping, reporting to trustees and beneficiaries, as well as filing with regulatory agencies and tax authorities. Administrative Expenses, excluding tax prep and other accounting, can be as low as .30% to as much as 1.25% annually of the market value of assets administered. Accounting and tax preparation varies according to complexity but appears to fall within $500 to $3,000 annually.
• Investment Duties include managing assets in compliance with the terms of the trust document/Bylaws and the Prudent Investor Act (This Act outlines fiduciary duties and more specifically, what is an appropriate investment objective). Investment Management expenses can range from .25% to 2.50% annually of market value of assets managed, depending on complexity and account size.