One of the chief goals of estate planning is to find ways of minimizing taxes on money left to beneficiaries. Sometimes settlors wish a portion of their assets to go to a charity as well. Charity trusts serve this purpose. The charitable remainder trust, or CRT, is one of the most common charitable trusts. A Clearwater trusts attorney will help you ascertain whether a charitable trust is right for you, and help you to set it up.
Charitable Remainder Trusts Explained
A CRT allows you, the settlor, to use part of the assets during your lifetime. A portion of the rest is left to named beneficiaries when you die, and the remainder goes to a charity that you name. The attorney with your Clearwater trusts law firm will tell you that one distinct disadvantage of this type of trust is that once it is established, you cannot add or remove beneficiaries. One way to circumvent this problem is to name heirs as contingent beneficiaries, which your will can order removed.
Types of Charitable Remainder Trusts
Three types of CRTs exist, and your Clearwater trusts attorney will help you choose which one is best suited to your needs: the unitrust, annuity trust or pooled income trust. While there are definite differences with each, in common is the fact that the named charity acts as trustee. The charity will invest the money in ways that will bring the highest return. It is the charity, then, that will pay assets out of the trust to beneficiaries for the appointed amount and duration.
It is important to note that the named charity must be one that is approved by the IRS for this purpose.
You can enjoy tax advantages in a number of ways. For one, you can take a tax deduction spread over five years for the amount you gift to charity. It is important to note, however, that the IRS will calculate the amount you are likely to receive out of the CRT during your lifetime and deduct this amount from the tax-deductible gift.
You may also be able to help beneficiaries avoid a capital gains tax, since charities do not have to pay this. Unless your estate is very large, it is unlikely you will need to worry about an estate tax.
A Clearwater Trusts Law Firm Can Help You Establish a CRT
If you are interested in setting up a charitable trust or have questions, call a Clearwater trusts attorney today. Call Coleman Law Firm at 727-461-7474.