Can a Trust Get a Tax Deduction for Making a Charitable Contribution?

Trusts -- living, revocable and irrevocable -- are a popular tool for estate planning. Assets in a trust pass to the beneficiaries outside of probate, so they inherit without having to wait so long. You can arrange for your trust to give money to charity, but it may not qualify the trust to take a tax deduction.

Revocable Trust

If you create a revocable living trust, you have the power to cancel it or take assets out of it. Most grantors -- trust creators -- makes themselves the trustee so they can keep managing the assets. Even if you're the trustee, your ability to give trust property to charity depends on the terms you drew up for the trust. Revocable trusts don't file or pay their own taxes, so any tax deduction for contributions goes on your own tax return. After you die, the trust becomes irrevocable.

Irrevocable Trust

When you place assets in an irrevocable trust, it's as if you transferred control of them to a separate person. The trust files its own tax return, based on whatever income the assets earn over the year. It also gets to take deductions: if your trustee donates money to charity, the trust takes the write-off. The trust can take a deduction equal to 100 percent of its income for the year, but no more than that.

Pooled Trust

If your main goal is to give money to charity, rather than setting up your own trust, you can invest in a pooled trust. Charities set up these trusts so that donors can contribute cash, stocks or bonds. The charity pays you back based on the returns on your investment and you get a tax write-off based on the size of your donation, less what you received. When you die, your trust assets pass to the charity.

Donation Rules

You and your trust don't get any write-offs unless you give to a group that can accept tax-deductible donations. The IRS has an online tool that lets you look up which groups qualify: generally, churches, schools, the government and charitable organizations make the cut. There's no deduction for giving money to a needy individual, however worthy. If you or the trust makes a non-cash donation, the deduction usually equals the purchase price. If the item has dropped in value, the current market value is all you get.

About the Author

A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.

Zacks Investment Research

is an A+ Rated BBB

Accredited Business.