Reasons You Should Consider a Charitable Remainder Trust
By: Barry E. Haimo, Esq.
September 24, 2020
Many people are inspired to use their wealth to support organizations and causes they care about. Philanthropy is a wonderful thing, and if you use the right strategies and tools, you can have a much larger charitable impact than you would otherwise.
One of those tools is a charitable remainder trust (CRT). This type of trust is an extremely powerful and useful wealth planning tool that can not only benefit a cause you feel passionate about, but also provide some benefits to you.
Here are a few of the reasons you should consider a charitable remainder trust.
How a Charitable Remainder Trust Works
Utilizing a CRT allows you to convert assets you may have, such as real estate, into an asset that produces an income. The trust distributes a fixed percentage of the assets to you and any beneficiary or beneficiaries you choose for a specific period of time.
You could, for example, use your lifetime or a period of time after your death to have the money distributed. Once that period of time expires, the remaining assets can be donated to an entity you specify.
The Benefits of a Charitable Remainder Trust
A CRT involves charitable gifts, so they have several benefits to consider, such as:
One of the goals of a CRT is to help reduce the burden of taxes. When you place an asset into a charitable remainder trust, if done properly, you are taking that asset out of your estate. It gives you a way to distribute assets to whomever you wish without estate tax.
To convert an asset into income, the trustee sells it at market value without a capital gains tax. You can also claim it as a tax deduction for the initial contribution.
Create an Income Stream
One of the largest benefits to creating a CRT is that it sets up an income stream for you and those you care about. A trust can pay you an income for your life or it can pay an income to someone else of your choosing. Using an attorney you trust to set up a CRT gives you the opportunity to ensure that your assets are distributed to your exact specifications.
Contribute to a Good Cause
If there’s a cause that’s close to your heart, you can set up a CRT to provide money to that cause. It provides you with a chance to make a difference in the world in a way that is meaningful… while also allowing you to take care of those closest to you financially. The only caveat is that any charity you choose must be tax-exempt if you want to get the tax benefits.
When you put an asset into a CRT, the trustee sells it at full market value due to the fact that the trust is exempt from capital gains tax. When you have an asset whose value has increased since you purchased it, that is a definite advantage.
Want to learn more about what a charitable remainder trust can do for you? Contact Haimo Law today.
Barry E. Haimo, Esq.
Strategic Planning With Purpose®
YOU ARE NOT OUR CLIENT UNLESS WE EXECUTE A WRITTEN AGREEMENT TO THAT EFFECT. MOREOVER, THE INFORMATION CONTAINED HEREIN IS INTENDED FOR INFORMATIONAL PURPOSES ONLY. EACH SITUATION IS HIGHLY FACT SPECIFIC AND EXCEPTIONS OFTEN EXIST TO GENERAL RULES. DO NOT RELY ON THIS INFORMATION, AS A CONSULTATION TO UNDERSTAND THE FACTS AND THE CLIENT’S NEEDS AND GOALS IS NECESSARY. ULTIMATELY WE MUST BE RETAINED TO PROVIDE LEGAL ADVICE AND REPRESENTATION. THIS INFORMATION IS PROVIDED AS A COURTESY AND, ACCORDINGLY, DOES NOT CONSTITUTE LEGAL ADVICE.