Hyden, Miron & Foster, PLLC Law Blog

Friday, October 4, 2019

What Is a Charitable Remainder Trust?

A charitable remainder trust gives you the opportunity to not only donate to a cause close to your heart, but will also provide you and your heirs substantial tax benefits. While this kind of trust may not be for everyone, it is definitely something you should consider for your estate plan. It is especially beneficial to larger estates looking to reduce tax liabilities.

What is a charitable remainder trust?

With a charitable remainder trust, you transfer title to property to the trust and the charity of your choice serves as trustee of the trust. You essentially give up legal control of the property you are transferring to the trust. Also, this type of trust is irrevocable. This means that once you establish the trust, there is no going back. Make sure you think through everything before establishing a charitable remainder trust.

The charity manages the trust and will pay you or another designated beneficiary a portion of the income produced by the trust property either for a specified number of years or for the remainder of your life. You may receive income from the trust in the form of a fixed annuity. This means that you would receive a fixed dollar amount each year from the trust. In the alternative, you may elect to receive a percentage of the trust assets annual. This annual payment would be a percentage of the current trust property value. Upon your death, the trust property goes to the charity.

There are big tax advantages associated with this type of trust. You are able to take an income tax deduction spread out over a five-year time frame for the value of the gift you are giving to the charity. Additionally, your estate tax liability will decrease. The trust property will be transferred to the charity upon your death. This means that the property will not be in your estate and subject to federal estate tax. You will also be avoiding capital gains tax. You reap the benefits of trust property appreciating in value without the tax liability. This is because the property is essentially controlled by the charity and charities do not pay capital gains tax.

Trusted Estate Planning Attorneys

Estate planning is so much more than drafting a will. With a comprehensive estate plan designed to meet your specific needs, you can utilize a wide range of legal tools that will maximize the value of your property and the whole of your estate. You may not have considered something like a charitable remainder trust before, but it could bring you and your beneficiaries huge financial benefits as well as providing for your favorite charity. This is especially true if you are set to have a sizeable estate.

For all of your estate planning needs, the dedicated attorneys at Hyden, Miron & Foster, PLL are here for you. We will not only answer all of your estate planning questions, but we will listen to your particular circumstances and goals in order to create an estate plan specifically designed for you. Contact us today.

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