Charitable Trusts, Day Five

We’ve been addressing Split-Interest Trusts recently; those are unique types of trusts that are established to benefit both charitable and non-charitable recipients.  These types of trusts would be a match for you if you have both philanthropic and family needs to attend to; if you both want and need to care for your family, but you also want to take advantage of the tax breaks you’d receive from setting up some form of Charitable Trust.

There are several types of Split-Interest Charitable Trusts; today we’ll cover the Charitable Remainder Trust.

In the simplest of terms, a Charitable Remainder nothing more than a irrevocable trust that is created to reduce taxes.  First it provides funds for named beneficiaries for a specific period of time not to exceed twenty years, then, after that specific period of time, gifting the remainder of the trust to a pre-designated charity.

In more detail, a Charitable Remainder Trust is an estate-planning tool in which assets are ultimately donated to charity, but until that time, the trusts’ grantor has the benefit of being able to use the assets as they see fit.

Named with the same principles in mind as the Charitable Lead Trusts; Charitable Remainder Trusts give money to non-charitable beneficiaries first—meaning the non-charitable beneficiaries reap the lead interest.  Once the lead interest period is complete, the remainder of the assets in the trust are given to the pre-determined charity or charities of the grantor’s choosing.

Again, as with all Charitable Trusts, Charitable Remainder Trusts are strictly regulated by the IRS; these types of trusts must comply with strict federal tax laws in order to receive tax benefits they were created to enjoy.

The benefit of this type of trust is twofold: the grantor both avoids the burden of capital gains tax on the gifted assets, as well as enjoying an income tax deduction for the fair market value of the remainder interest that the trust earned in the meantime.

If a Charitable Remainder Trust seems like the right move for you and your family, seek the assistance of a qualified estate-planning attorney.

Comments are closed.