Charitable remainder trusts (CRTs) offer individuals unique opportunities to support their favorite causes while reaping significant financial benefits. With a CRT, you can provide for a charity of your choice and receive a steady income stream during your lifetime. This legal tool combines philanthropy and financial planning, making it a powerful estate planning strategy for those who wish to leave a lasting legacy.
At the Law Offices of Carey Thompson, PC, we help clients throughout Dallas-Fort Worth navigate the complexities of charitable remainder trusts, ensuring that their philanthropic and financial goals are aligned. Contact our El Paso office today to learn how CRTs may be right for you.
What Is a Charitable Remainder Trust?
A charitable remainder trust is an irrevocable trust that allows you to donate assets to charity while retaining income from those assets for a set period, typically for life or a term of up to 20 years. After this period, the remaining assets are distributed to one or more designated charities. This structure offers several benefits, including tax advantages, an income stream, and the ability to make a lasting charitable impact.
There are two main types of CRTs:
- Charitable Remainder Annuity Trust (CRAT): This trust provides a fixed annual income based on a percentage of the trust assets’ initial value.
- Charitable Remainder Unitrust (CRUT): This provides a variable annual income based on a percentage of the annually revalued trust assets.
Both options allow you to balance your financial needs with your philanthropic desires.
Benefits of a Charitable Remainder Trust
CRTs offer numerous advantages that make them an attractive option for estate planning. Whether you want to minimize taxes, generate income, or support a charitable cause, a CRT can help you achieve your goals.
Some of the key benefits include:
- Income for Life or a Term of Years: The trust provides you or your beneficiaries with a reliable income stream for life or a set term.
- Significant Tax Advantages: Contributions to the CRT are tax-deductible, and the trust itself is exempt from capital gains taxes on the sale of appreciated assets.
- Legacy of Philanthropy: Upon the trust’s termination, the remaining assets will be distributed to your designated charities, leaving a lasting impact on the causes you care about.
- Estate Planning Flexibility: A CRT can help reduce the size of your taxable estate, potentially lowering estate taxes for your heirs.
At the Law Offices of Carey Thompson, we can explain how these benefits apply to your unique situation and help you structure your trust to maximize its advantages.
How Does a Charitable Remainder Trust Work?
Establishing a CRT involves several key steps. We work closely with our clients to ensure each step is carefully executed and aligns with their overall estate plan.
- Transfer of Assets: You transfer appreciated assets, such as stocks, real estate, or other investments, into the trust. The trustee then manages and invests these assets to generate income.
- Income Stream: You (or your beneficiaries) receive a percentage of the trust’s assets as income, either as a fixed amount (CRAT) or a variable amount (CRUT) based on the assets’ value each year.
- Tax Deduction: You can claim a charitable deduction on your income taxes for the present value of the remainder interest that will eventually go to charity. The deduction is based on factors like your age, the trust’s term, and the payout percentage.
- Charitable Donation: At the end of the trust’s term, the remaining assets are distributed to the charity or charities you designated when the trust was created.
By following these steps, you can secure income for yourself and your loved ones while making a meaningful charitable contribution.
Who Should Consider a Charitable Remainder Trust?
CRTs are not suitable for everyone, but they can be particularly beneficial for individuals who:
- Want to diversify a concentrated stock position without incurring capital gains taxes.
- Own highly appreciated assets and want to avoid paying capital gains tax on the sale.
- Wish to support a favorite charity or cause while still providing for themselves or their loved ones.
- Are looking for a way to reduce their taxable estate and minimize estate taxes.
We often recommend CRTs for clients with a robust philanthropic desire but also want to secure income during their lifetime. If this sounds like you, we can help you determine if a CRT is right based on your financial situation and charitable goals.
Setting Up a Charitable Remainder Trust
Trust the Law Offices of Carey Thompson to guide you through establishing a CRT. Our experienced estate planning attorneys will work closely with you to assess your financial goals, identify the best assets to place in the trust and select the right charitable beneficiaries. We offer:
- Personalized Guidance: We take the time to understand your unique situation and offer tailored advice on how a CRT fits into your overall estate plan.
- Tax Planning: Our attorneys will work with your financial advisors to ensure you maximize the tax benefits associated with a CRT, including income tax deductions and capital gains tax savings.
- Long-Term Planning: We help you structure your CRT to provide a reliable income stream while ensuring your charitable goals are met in the long term.
With our guidance, you can be confident that your CRT will be established correctly and align with your financial and philanthropic objectives.
Contact Us for Help with Charitable Remainder Trusts
If you’re considering a charitable remainder trust as part of your estate plan, the Law Offices of Carey Thompson is here to assist you. Contact us today to schedule a consultation and take the first step toward leaving a lasting legacy.