a form of trust in which the donor (trustor or settlor) places substantial funds
or assets into an irrevocable trust (a trust in which the basic terms cannot be
changed or the gift withdrawn) with an independent trustee, in which the assets
are to go to charity on the death of the donor, but the donor (or specific beneficiaries)
will receive regular profits from the trust during the donor's lifetime. The IRS
will allow a large deduction in the year the funds or assets are donated to the
trust, and the tax savings can be used to buy an insurance policy on the life of
the donor which will pay his/her children the proceeds upon the donor's death. Thus,
the donor (trustor) can make the gift to charity, receive a return on his/her money
and still arrange to make a large gift at death to his/her heirs. The disadvantage
is that the assets are permanently tied up or committed.
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