Lesson 51: Introduction to Charitable Remainder Trusts

Charitable Remainder Trusts (CRTs) are a powerful tool in estate planning that allows individuals to donate assets to charity while retaining an income stream for themselves or other beneficiaries. This lesson will cover the fundamental concepts of CRTs, their benefits, and how they operate. For an in-depth discussion, consider this comprehensive guide on estate planning.

What is a Charitable Remainder Trust?

A Charitable Remainder Trust is a tax-exempt irrevocable trust designed to reduce the taxable income of individuals by first dispersing income to the trust beneficiaries for a specified period of time and then donating the remainder of the trust to designated charities.

How Does a Charitable Remainder Trust Work?

In a CRT arrangement, the donor transfers assets to the trust. The trust then pays out an income stream to the income beneficiaries (which can include the donor) for a specified term. At the end of the term, the remaining trust assets are transferred to the designated charitable organizations.

Types of Charitable Remainder Trusts

• Charitable Remainder Annuity Trust (CRAT): Pays a fixed annuity amount each year.
• Charitable Remainder Unitrust (CRUT): Pays a percentage of the trust's assets, recalculated annually.

Benefits of Charitable Remainder Trusts

There are several benefits to setting up a CRT:

Setting Up a Charitable Remainder Trust

Setting up a CRT involves several steps, including selecting the type of CRT, determining the payout rates, choosing the income beneficiaries, and designating the charitable organizations to receive the remainder interest.

Conclusion

Charitable Remainder Trusts provide a unique way to support charitable organizations while also benefiting from tax advantages and an income stream. For more information on the tax benefits of CRTs, please refer to Lesson 52: Tax Benefits of Charitable Remainder Trusts.