Charitable Remainder Trusts

Who wouldn’t like to increase income while reducing taxes?  Though it may sound too good to be true there is a way!  We have had several clients through the years who express interest in donating to a charity when they pass. While there are many ways to go about this, using a charitable remainder trust (CRT) can provide benefits to the donor during one’s life as well as accomplish a person’s final wishes.

What is a Charitable Remainder Trust?

A charitable remainder trust is an irrevocable trust that can provide a stream of income to a recipient during a period of time specified in the trust with the remainder of the assets going to charity at the donor’s death.  Any kind of asset can be transferred into a CRT however, it is extremely beneficial to the donor to transfer highly appreciated assets.  Highly appreciated assets can have very large capital tax consequences.  When they are transferred into a CRT the asset can provide a stream of income while avoiding the tax.

Helping Yourself and Helping Charity

Transferring assets into a CRT can have major tax benefits.  After setting up the trust and transferring assets, you are allowed to take an income tax deduction that can be spread out over five years.  Also, when you die, the assets in the CRT go to the charity you have chosen therefore will not be included in your estate. Lastly, assets that may not be income producing assets outside of the CRT can become income producing assets.  The donor can enjoy the income stream without paying tax on any profits gained.

If you are considering making a substantial donation to a charity upon your death, or have assets that are highly appreciated, a CRT may be just the thing for you!  Consulting a qualified estate planning attorney to review your options is always recommended.