Estate Tax: What It Is, Who It Affects, and How Charitable Trusts Help

When someone passes away, their assets—homes, savings, investments—don’t just disappear. They’re passed on. But before they reach family members, the government may take a cut. That’s the estate tax, a federal tax on the total value of a person’s assets after death. Also known as inheritance tax, it doesn’t apply to everyone—only estates worth more than $13 million in 2025. Still, for those who cross that line, it can mean losing hundreds of thousands to taxes instead of leaving them to loved ones or causes they care about.

That’s where charitable trusts, legal tools that let you give assets to charity while keeping income or benefits during your lifetime. These aren’t just for the ultra-rich—they’re a smart way for anyone with a meaningful estate to reduce tax burden and create lasting impact. A charitable remainder trust, a specific type of trust that pays income to beneficiaries first, then gives the rest to charity, lets you avoid capital gains tax on appreciated assets like stocks or property. And under the 5% rule, a federal requirement that at least 5% of the trust’s value must be paid out annually to beneficiaries, you get steady income while ensuring the charity gets a solid gift after you’re gone.

Many people don’t realize how much control they have. You don’t have to give everything away. You can set up a trust that pays you or your spouse for life, then leaves the rest to a local food bank, environmental group, or senior center. It’s not about giving up—it’s about redirecting. And it’s not just about taxes. It’s about legacy. The same people who volunteer at charity shops or join community outreach groups often want their giving to continue beyond their lifetime. A charitable trust makes that possible without handing over control to strangers or letting the government take the largest share.

What you’ll find below are real stories and clear explanations about how people use these tools—not just to save money, but to make sure their values live on. From how trusts work in practice, to why some nonprofits rely on them for long-term funding, to what happens when families misunderstand the rules—you’ll see how estate tax isn’t just a legal term. It’s a turning point for families, communities, and the causes that depend on them.