We’ve all heard the popular addage that “it’s better to give than receive.” With the proper use of a Charitable Remainder Trust you can benefit from both. A Charitable Remainder Trust can be a great way for you to aid your favorite charity while receiving significant tax breaks for you and your heirs. At Marc A. Bronstein, A Professional Law Corporation, we can explore the option that will work best for you and your estate.
A charitable remainder trust by definition is “an irrevocable trust established by a donor to provide an income stream to the income beneficiary, while the public charity or private foundation receives the remainder value when the trust terminates.”
The fact that charitable trusts are irrevocable makes it important to have a complete understanding before setting one in motion. Setting up any kind of charitable trust requires an experienced estate planning attorney. After creating a charitable remainder trust, the property that you plan to donate is transferred to it. The charity must be one approved by the IRS, giving it tax-exempt status. This charity manages or invests the property, paying you, or someone you name, a portion of the generated income for a period specified in the trust document. Then, at your death or the end of the specified period, the property goes to the charity.
Using a charitable remainder trust can allow the donor to take an income tax deduction spread over a certain period of time and can turn appreciated property into cash without paying capital gains taxes on the profit. Since the trust property eventually goes to the chosen charity outright, it is no longer in your estate and isn’t subject to federal estate tax.
Setting up payments with a charitable remainder trust can be done in two ways; fixed annuity or a specified percentage of the trust assets. We can help to determine what is right for you and your heirs and whether a charitable trust is the answer to your estate planning needs. Call us today.