The charitable remainder trust is a tax-wise way to increase your current income while you provide a generous gift for our future.
The trust works quite simply:
- You transfer money, stock, or other property to a trustee.
- The trustee then pays you and/or your spouse income for life. (In the alternative, you could designate other individuals as the lifetime beneficiaries of the trust, or set up the trust for a certain number of years.)
- After the lifetime income payments have been made, the trustee transfers whatever amount is left in the fund to us for the particular purpose you designated when you created the trust.
Often, the charitable remainder trust is created to provide additional income for the donor and/or the donor’s spouse for life. The lifetime payments will depend on which kind of charitable remainder trust the donor chooses. If it is an annuity trust, the beneficiary receives a particular sum of money each year. If it is a unitrust, the beneficiary receives a percentage of the total value of the assets in the trust each year. Consequently, if the donor wishes to receive a certain amount of money each and every year, he or she creates an annuity trust. If the donor wishes to receive an amount which increases or decreases with the total value of the assets in the trust, he or she creates a unitrust.
In addition to the lifetime of income, both the annuity trust and the unitrust offer a number of benefits:
- (a) -The donor receives a substantial federal income tax deduction upon the creation of the trust.
- (b) – No capital gains tax liability is incurred upon the transfer of appreciated property to fund the trust.
- (c) – The beneficiaries receive the benefit of professional investment management.
- (d) – The creation of the trust reduces the property which must be administered in the donor’s estate, and results in favorable estate tax treatment.
If you would like to learn more about Charitable Remainder Trusts, please request our Guide to Planned Giving.