Definition
A
Charitable Remainder Trust normally is used as a strategy for converting highly
appreciated assets into income producing assets, without income tax liability.
The Charitable Remainder Trust is an irrevocable trust with both charitable and
non-charitable beneficiaries.
The donor transfers
highly appreciated assets into the trust and retains an income interest. Upon
expiration of the income interest, the remainder in the trust passes to a
qualified charity of the donor’s choice.
If properly structured, the CRT permits the donor to receive income, estate,
and/or gift tax advantages. These advantages often provide for a much greater
income stream to the income beneficiary than would be available outside the
trust.
Unitrust vs. Annuity Trust
There are
two types of CRT the Unitrust and the Annuity Trust. The
main difference between the two is the way your annual income, paid to you by
the trust, is calculated.
Under the provisions of a
Unitrust, the annual payment to you must be a fixed percentage of the
market value of a trust's assets as determined each year or, alternatively, the
lesser of 5 percent of such value or the trust's income. You can see that
there are no guarantees of the specific amount you will receive. Your
payments will depend upon the changing values of the trust property or income
from year to year.
Using an Annuity
trust, the trust specifies an annual amount to be paid to you. This
guarantees that you will receive a specific amount which you can depend upon
every year.
Charitable Remainder Trust – Potential Benefits
- Eliminate Capital Gains
Tax
- Tax deductible transfers
to trust
- Trust income can be
significantly greater than income generated outside trust
- You choose duration of
income from trust
- Increased retirement
income
- Eliminate estate tax on
trust assets
- Preserve estate for
family & heirs through survivorship policy funded with added income
- Provide charitable
bequests to the causes of your choice
Those Who Would Benefit Most From a CRT May Have Some of the Following
Characteristics
- Own highly appreciated
assets
- Would like to reposition
such assets
- Are in a high income tax
bracket
- Are subject to estate
tax at death
- Have philanthropic
desires
Advisory Services offered through
Envision Investment Advisors, LLC., An SEC Registered Investment Advisory Firm.
(Envision & Crossroads Retirement are not affiliated.)
Charitable Remainder Trust
