Charitable Remainder Trusts

Many individuals want to balance their desire to be charitable with their need for current income. A Charitable Remainder Trust (CRT), typically established with assets of $100,000 or more, addresses these goals through an irrevocable gift that provides a lifetime stream of income.

A donor creates a CRT and funds it with assets such as cash, securities, or real estate. The donor (or a specified beneficiary) receives payments from the trust for a period of time – up to 20 years or the beneficiary’s lifetime. The trust agreement may also be written to distribute income to two beneficiaries for a period of time, or for life.

The donor receives an income tax deduction when the CRT is funded, and the donor’s taxable estate is reduced by the value of the gift. When you fund a Charitable Remainder Trust with appreciated assets, capital gains taxes are avoided. Alternatively, if you were to sell the appreciated assets and fund the CRT with the proceeds (cash), you would be responsible for capital gains taxes on the appreciation.

When the last income recipient dies, or at the end of the trust term, the remaining trust assets are distributed to The Shelter for Abused Women & Children. This, the “charitable remainder,” gives the trust its name.

There are several Charitable Remainder Trusts, each with its own unique benefits:

• Charitable Remainder Annuity Trusts (CRATs) pay the beneficiaries a predictable fixed dollar amount, or fixed percentage of the initial value of the assets, which funded the trust

• Charitable Remainder Unitrusts (CRUTs) pay beneficiaries income as a fixed percentage of the trust’s current value, reassessed annually

• Flip Charitable Remainder Unitrusts (Flip CRUT) hold an asset for a period of time, paying actual earnings, if any, to the beneficiaries, and then “flips” to a standard payment unitrust when an anticipated event occurs, such as the sale of the property held by the trust