Charitable Remainder Trusts allow donors to donate assets to a charity while keeping and using them during their lifetime. The trust offers tax benefits and reduces inheritance taxes, but cannot be revoked once set up. Financial planners can help structure the trust.
Charitable Remainder Trusts are arrangements that allow you to proceed with the donation of property and assets to a specific charity or non-profit organization, but allow the grantor of the trust to keep and use those assets for as long as he or she remains alive. Upon the grantor’s death, the assets are wholly transferred to the designated charity or non-profit organization and may be used as the organization sees fit. The donor has the comfort of knowing that the assets will ultimately be used for a good cause and also provides some excellent financial benefits in the meantime.
One of the main benefits of a charitable residual trust is that the grantors can avoid any type of capital gains tax on assets that are donated through the charity. In the event that the donated assets continue to generate income in the short term, the grantor can also make a tax deduction for the fair market value of the interest income accrued on the asset. These arrangements help enable the donor to benefit from his assets for the rest of his life, both directly and indirectly.
Another consideration for entering into a charitable remaining trust is the fact that any assets placed into the trust do not count as part of the remaining estate. This means that the inheritance taxes that will be levied at the time of death will be significantly reduced. For survivors who inherit the portions of estate that are not connected to the charitable trust, this benefit can make a huge difference in regulating and distributing the remaining assets according to the wishes of the deceased.
One thing to keep in mind about a charitable trust is that the trust cannot be revoked once it has been set up. However, there are some provisions for redirecting resources from one charity to another, assuming the new charity meets the associated qualifications. Financial planners can help interested individuals determine the exact structure and function for the remaining charitable trust, as well as prepare projections for how the trust arrangement would benefit the donor in the long run.
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