A charitable remainder trust is an irrevocable trust that provides income to one or more non-charitable beneficiaries for a period of time, after which the trust's assets are distributed to one or more charitable beneficiaries. The most common type of charitable remainder trust is the charitable remainder annuity trust, which pays a fixed annuity to the non-charitable beneficiaries for the term of the trust.
What is a charitable remainder trust and how does it work?
A charitable remainder trust is an irrevocable trust that pays an income to one or more income beneficiaries for a term of years or for the life of the income beneficiaries, after which the trust's remaining assets are distributed to a charity or charities of the trustmaker's choice.
The trustmaker transfers property to the trust, which is then managed by a trustee. The trustee invests the trust's assets and pays the income beneficiaries an annual income, which can be either a fixed amount or a variable amount based on the trust's investment performance. When the trust's term ends or the last income beneficiary dies, the trust's remaining assets are distributed to the charity or charities named in the trust agreement.
Charitable remainder trusts can be an effective way to reduce taxes on the sale of appreciated property, provide an income for the trustmaker or other beneficiaries, and support a favorite charity. What is a charitable remainder trust? A charitable remainder trust is a type of irrevocable trust that is typically used for estate planning and tax purposes. The trustor (the person who creates the trust) transfers property into the trust, and the trustee (the person who manages the trust) holds and invests the property for the benefit of the trustor and the trustor's designated beneficiaries. The trustor can receive income from the trust during their lifetime, and upon their death, the trust property passes to the designated beneficiaries.
What are the advantages of a charitable remainder trust? A charitable remainder trust is an irrevocable trust that pays income to one or more non-charitable beneficiaries for a term of years or for the life of the beneficiary, after which the remainder of the trust assets pass to a charity.
The main advantage of a charitable remainder trust is that it allows the trust creator to receive a tax deduction for the value of the assets that will ultimately go to charity. Additionally, the trust can provide income for the beneficiaries during the term of the trust, which can be particularly helpful if the beneficiaries are not able to support themselves.