What Is A Charitable Remainder Trust

A charitable remainder trust is a financial entity that was created in the 1960s with the aim of encouraging gifts to organizations involved in research, education and community support. There are several types of charitable remainder trusts that could be an enhancement to your financial planning.

These financial vehicles are very flexible, are tax-exempt and involve ever-changing tax laws. For this reason, you are advised to seek advice and assistance from a qualified financial planner. An expert financial planner can help you select or create the trust and living trust that best reflects your circumstances and requirements.

A charitable remainder trust is an individual legal identity, authorized by US Congress. These trusts allow you to make a gift to a charity, receive a tax deduction, alter the taxable assets in your estate and yet generate an income, all simultaneously, within the one identity. You can name yourself as the beneficiary of this income, members of your family or whoever you want.

On your death, the assets remaining in the trust will automatically go to the charity you have named when you set it up. You have the right to change the specified charity at any time through your life. The charity you name can include any church, hospital, research foundation or not for profit university.

There are two main types of charitable remainder trust available to you. These are charitable remainder unitrust and charitable remainder annuity trust. The unitrust type pays you an annual percentage, determined by you when you set it up, of the market value of the assets in the trust. These assets are valued annually, and you have the freedom to contribute additional funds into the trust at any time.

The charitable remainder annuity trust pays a set amount each year to the beneficiaries of the trust, rather than a percentage. This continues for the life of all beneficiaries, and then the balance in the trust goes to the nominated charity. However, in this type of trust, you may only make one contribution.

Seek advice from your financial planner to find out whether a charitable remainder trust is applicable to your situation.

By: FrankRod

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If you are interested in setting up a charitable remainder trust it should be done properly. Much like you wouldn't set up your living trust without council the same applies for charitable trusts.