A CRT, otherwise known as a Charitable Remainder Trust, is a potent estate planning tool. It is meant for individuals who wish to leave some portion of their estate to charity after they pass away, but while they are still living, enjoy a substantial charitable deduction and income stream. In order to achieve tax benefits from a CRT, it must be an irrevocable trust. This means you can’t change your mind later.

Here is how it works:

• A portion of your assets is contributed to the trust. The trust manages those assets and makes payments (at least annually) to you, typically until you pass away.
  
  
• The trust pays no taxes on its income. Thus, it can sell an appreciated asset and pay no income tax on the gain. It produces a higher rate of investment return which, in turn, allows larger payments to you.
  
  
• When you pass away, the remaining assets in the trust pass to your pre-designated charities. Thus, the name “charitable remainder trust” was coined.
  
  
• In addition, you will receive a current charitable deduction for an amount equal to the estimated remainder in the trust at the time of your death.

Since the remainder will pass to one or more qualified charities upon your death, the trust will be eligible for the estate tax charitable deduction. You might even consider using some of the savings from the charitable contribution to purchase life insurance for the benefit of your heirs.

Let’s do a recap of all its benefits. You have reduced your estate, provided an income stream, and received a large up front charitable deduction, even though the charity has to wait until you pass away to receive anything from your estate. Not bad at all!

Although Charitable Remainder Trusts can be very complex, the benefits generally make them a viable planning tool. Please call this office if we can be of assistance.