Q: What is a Charitable Remainder Trust (CRT)?
A: A CRT is a special type of trust where the donor contributes appreciated assets (like stock, real estate, or business interests) and, in return, receives income for their lifetime or a specified number of years. After this period, whatever remains in the trust is donated to one or more charities of the donor's choice.
Q: What are the key benefits of a CRT?
1. Tax-Exempt Trust:
Assets placed in the trust are not subject to capital gains tax on sale.
100% of the sale proceeds can work in the trust, making the results significantly better compared to selling the asset outright.
2. Income Tax Charitable Deduction:
Donors receive a partial income tax deduction based on the fair market value of the gift.
This deduction reflects the present value of the charity’s future interest and can lead to meaningful tax savings.
3. Reliable Income Stream:
The donor avoids capital gains tax on the sale, leaving the full proceeds to invest in the trust.
The CRT provides a predictable income stream, distributing either a fixed percentage of the trust’s annual value or a fixed amount over the donor’s lifetime (or a specified term of years).
4. Future Gift to Charity:
Donors can align their financial goals with their philanthropic values.
Beneficiaries can include single or multiple charities, a private foundation, or a donor-advised fund.
Charities can be changed anytime during the donor's life.
Q: Why is a CRT considered a great planning tool?
A: CRTs offer a combination of tax advantages and income security, making them an excellent option for clients who want to address financial needs while supporting their favorite charities in the future.
Q: Can the donor change the selected charities?
A: Yes, donors can change the designated charities at any time during their lifetime. They can even name a private foundation or donor-advised fund as the beneficiary for greater flexibility and impact.
Q: What happens to the assets after the donor’s lifetime or term?
A: After the specified period, the remaining assets in the trust are donated to the chosen charity or charities.
Q: How does the CRT align with philanthropic goals?
A: The CRT allows donors to make a meaningful future gift to charity while addressing their financial goals. It provides flexibility and a structured way to maximize impact.
Q: Where can I learn more about CRTs?
A: Stay tuned for future videos where we’ll explore CRT features in greater detail. For now, feel free to connect with Jeff Christie to discuss how this planning tool could work for your clients.