What Is A Charitable Remainder Trust And What Are It's Benefits?

A Charitable Remainder Trust (“CRT’) is a Trust created for charitable and estate planning purposes funded by a taxpayer with charitable and tax reduction intentions. The current beneficiary of the trust (often the person making the donation or an heir of such person) receives cash flow from the Trust for a chosen fixed period of time or until death. The cash flow is either an annuity (percentage of the original value of the assets) or a unitrust amount (a percentage of the current value of the trust assets). Once this period expires, the balance of the Trust assets are transferred to a charity chosen by the person who created the Trust. A Charitable Remainder Trust must be irrevocable for the tax benefits listed below to apply.

The Tax Benefits of a Charitable Remainder Trust include:

1. By donating money or property to a charity in the form of a CRT you will receive a current charitable income tax deduction equal to the actuarial value of remainder interest ultimately passing to the charity while still receiving cash flow from the property for the term chosen.
2. Donations of appreciated assets into a CRT avoid any capital gains tax on the donated assets. This is especially important if you have a highly appreciated asset in your portfolio.
3. Assets held in a CRT for the benefit of the donor are not subject to estate and gift taxation, which can be substantial sums of money (as high a 53%). It is also possible to set up a CRT under the terms of your Last Will and Testament.