Charitable Remainder Trusts - 1st Source

Are you interested in leaving a legacy to your heirs, children, and/or grandchildren and maximizing the potential of your assets for future generations?  What if you could do both and help a favored charity in the process too?  Often clients don’t consider all available options when leaving wealth behind for their loved ones, and because of that their heirs don’t get everything they should.

One option you should consider when crafting your estate plan with an attorney is a charitable remainder trust (CRT). A CRT allows your beneficiaries to maximize what you leave them by avoiding a tax burden, and at the same time, it allows you to support your favorite charity. However, it’s only a good option if you have a million dollars or more to leave behind. It’s not the right choice for smaller amounts because it must be large enough to provide income for your beneficiaries while also retaining enough value to benefit the designated charity. Let me explain how it works.

Reduces Tax Burden

Basically, what you do is establish a tax-exempt irrevocable trust, which will significantly reduce the tax burden on your beneficiaries, allowing them to receive more money and a steadier income from the trust. This is accomplished by first contributing assets into the CRT and then having it pay your beneficiaries a designated amount for a certain period of time. When that time expires, the remainder of the trust is then directed to your designated charity. Therefore, there is no federal tax, as your estate gift was donated to charity.

Bottom Line

Of course, this is oversimplified, and requires strategic planning to make it work. Every situation is different, but a charitable remainder trust is certainly an option worth considering if you have a significant amount of assets and you want your heirs to get the most they possibly can at the time of your passing. At the same time, you can positively impact a favored charity.

I would love to chat with you about this option and other options you may want to discuss with your attorney when you make your estate plan. Please feel free to contact me at [email protected] or by calling 574-235-2798.