Charitable Remainder Trusts


Charitable remainder trusts offer a way to create tax benefits now, income in the future and a charitable gift when the person receiving the income passes. Most assets can be used to establish a charitable remainder trust including cash, stocks, bonds, mutual funds, or real estate. Specifically, when the trust is created:

  1. An immediate tax receipt is generated.
  2. The income from the asset may be assigned to the person of your choosing.
  3. The asset rolls to the charity of your choice after the income beneficiary passes.

This is an excellent vehicle to use when you have an asset that you wish to gift to a charity, but you or a loved one requires income from the asset. Charitable remainder trusts can be setup at any time or established in your last will and testament.

The Mechanics

A trustee will need to be named, this person or institution manages the trust. When the assets from the trust produce income, it is the trustee’s responsibility to pay this income out to the designated beneficiary for the life of the trust.

The trust is terminated in one of three ways, upon the death of the donor if the asset doesn’t product income, upon the death of the income beneficiary if the asset does product income or when the term of the trust expires if the trust was created with a specific term.

Benefits to Consider

  • Tax Planning – a tax receipt is generated when the trust is created which may be used against income for up to 5 years.
  • Income Planning – even though the asset is committed to a charity, you may still earn income from the asset for yourself or assign that income to a loved one.
  • Protection – assets held in the trust may be protect from creditors.
  • Probate Fees – any assets that are held in the trust are not subject to probate fees.
  • Privacy – unlike your will, which is a public document on your passing the details of the trust may be kept private.
  • Maintenance – the trustee becomes responsible for maintaining the asset which can take the responsibility off your shoulders.

Issues to Consider

Charitable remainder trusts are a fantastic way for certain individuals to give to charities, but there are some issues that need consideration before a trust is established. To qualify for a tax receipt, assets contributed to a charitable remainder trust must be irrevocable. This means, as the donor, you are giving up control of the asset and this control can not be taken back. Also, you cannot access any amount or capital that exists inside the trust.

If you want to know more information about charitable remainder trusts or discuss your specific situation, please contact us.

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