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Charitable Trusts

A person who wishes to set aside property for the benefit of another may form a trust. Unlike a corporation or LLC, a person may form a trust without filing anything with the government. Instead, the trust is formed when a person transfers property to a person or an entity, known as a trustee, and directs the trustee to use the transferred assets for the benefit of a third person, known as a beneficiary. State law dictates how a trustee must handle the property that is being used for the benefit of the beneficiary.

Some nonprofit entities are formed as charitable trusts, where the beneficiaries are not specific individuals. Instead, the trustee of a charitable trust uses the property for the benefit of a specified purpose, such as education of disadvantaged youth. The laws that apply to trusts in general also apply to charitable trusts. Because modern corporations are generally easy to form, those who wish to form a charitable nonprofit entity are more likely to form a corporation than they are to create a charitable trust.

Inside Charitable Trusts