BREAKING DOWN: What is a Charitable Remainder Trust

A central idea of a charitable remainder trust is to reduce taxes. This is done by first donating assets into the trust and then having it pay the beneficiary for a stated period of time. Once this time-frame expires, the remainder of the estate is transferred to the charities deemed by the beneficiary.

Charitable remainder trusts are irrevocable. This means that they cannot be modified or terminated without the beneficiary’s permission. The grantor, having transferred assets into the trust, effectively removes all of his or her rights of ownership to the assets and the trust upon creation of its irrevocable status. In contrast, a revocable trust, allows the grantor modifications.

This charitable giving strategy also enables people to pursue philanthropic goals while still generating income. In addition to tax management, charitable remainder trusts can offer benefits for retirement and estate planning.

Two main types of charitable remainder trusts include:

  1. Charitable remainder annuity trusts or CRATs that distribute a fixed annuity each year
  2. Charitable remainder unitrusts or CRUTs that distribute a fixed annual percentage based on the balance of the trust assets (CRATs do not allow for additional contributions, while CRUTs do permit this.)

We invited you to talk to your financial planner and tax adviser to see if you could benefit from this charitable giving tool

For over 30 years, we have been helping donors like you support their favorite local charities in smarter ways. We can help you explore the different charitable vehicles available and explain how you can complement and maximize your current giving strategy.

Contact Mark Andersen at mark@yvcf.org for more information.