Ask a Lawyer : Chapter 10 - Do You Need a Trust

Pros and Cons of a Charitable Trust

Q. I am considering establishing a charitable trust in my name to benefit several causes that are close to my heart. Are the expenses of setting up and running a trust apt to be prohibitive? Am I better off to make a gift to an established charity and specify how I’d like the money used?

A. The expenses of establishing and operating a charitable trust can be considerable. Unless you are interested in placing at least $100,000 in the trust, the expenses of administration will eat up most of the income, leaving little for distribution to charity.

An alternative approach is to consider a gift to a “donor-advised fund.” These funds are charities that have been established by a number of well-known mutual funds and trust companies. The fund itself does not engage in charitable activities. It simply invests the funds that you have donated to it and later distributes them to your favorite charities when you request it to do so. Although the fund is not legally required to follow your directions as to which charities will receive the funds, it will almost always do so. Using a donor-advised funds gives you many of the advantages of a charitable trust, without the administrative headaches and expenses.