Charitable Remainder Trust

One method of making a gift with a retained right to income is a charitable remainder trust. Let's look at some of the benefits a charitable remainder trust can provide:

  • An income for you and/or your beneficiaries for life or a period of up to 20 years
  • An immediate and substantial income tax charitable deduction (subject to certain income limitations) for itemizers
  • Potential avoidance of current capital gains taxes when the trust is funded with long-term appreciated property
  • Reduction of your estate to avoid or reduce death taxes
  • Substantial reduction of probate costs, taxes, and other estate transfer expenses.

An Immediate Charitable Deduction

A gift to a charitable remainder trust qualifies for an immediate income tax deduction, even though income is to be paid to the donor (and/or other beneficiaries) for life. The exact amount of the charitable deduction depends on the:

  • value of the property transferred to the trust
  • amount of income benefits that are payable each year to individual beneficiaries
  • approximate length of time the income benefits will be paid
  • interest rates prevailing at the time the gift is made.

Despite the tax and financial benefits of a charitable remainder trust, you should consider this kind of arrangement only if you and your advisors determine it is compatible with your overall estate, tax and financial plan.