A Charitable Remainder Trust or CRT is a type of trust that allows an individual to donate assets to the trust and receive income from that same trust for a specified perod. After maturity they can then donate the remaining assets to one or more non profit and/or church organizations.
CRT's are designed to reduce the taxable income of individuals and offer benefits for retiement and estate planning.
How a Charitable Remainder Trust Works
In a charitable remainder trust:
A donor transfers property, cash or other assets into an irrevocable trust
The trust's basis in the transferred assets is carryover basis, which is the same basis that it would be in the hands of the donor, for assets transferred to the trust during the lifetime of the donor
The trust pays income to at least 1 living beneficiary
The payments continue for a specific term of up to 20 years or the life of 1 or more beneficiaries
At the end of the payment term, the remainder of the trust passes to 1 or more qualified U.S. charitable organizations
The remainder donated to charity must be at least 10% of the initial net fair market value of all property placed in the trust
Charitable remainder trusts are irrevocable. Assets that go in can't be taken back.
Reasons to Create a Charitable Remainder Trust
Charitable remainder trusts can offer many benefits, including:
Help you plan major donations to charities you support
Provide a predictable income for life or over a specific time period
Allow you to defer income taxes on the sale of assets transferred to the trust
May allow you a partial charitable deduction based on the value of the charitable interest in the trust