What Is A Charitable Remainder Trust ?

Article Written By: RebbecaMyers

A charitable remainder trust is an arrangement that enables the donation of property and/or assets to proceed as being donated, while at the same time giving the trust 'grantor' the right to retain and use the assets as long as the said grantor is still alive. Once the grantor dies, then the assets go directly to whatever designation was assigned them according to the charitable remainder trust. It's a way of showing good will by someone who is alive but wants to make a difference when gone.

There are some financial advantages for the grantor as well. It enables them to dodge any capital gains taxes that would be imposed on the assets donated. And if by chance the assets still bring in some type of income for any period of time, then the grantor can also take advantage of tax deductions on the fair market value of the interest earned. This gives the grantors some pretty good benefits from their assets for as long as they remain alive.

Another good benefit of this action, is that the estate taxes that come due once the grantor dies, will not be imposed due to the fact that the assets have been donated aren't considered part of the estate. This can turn out to be a substantial savings for the survivors and beneficiaries of the grantor. It not only cuts down on costs, but on the distribution of assets that are left to the estate once the grantor passes.

There's a lot to be gained, and avoided as well, by knowing what a charitable remainder trust is, and knowing how it works. An important thing to understand is that once the grantor puts it into place, it's 'irrevocable' and cannot be done away with. This is an irrevocable trust of sorts. Of course, there are always provisions that can help in certain circumstances with distribution and other unforeseen problems, but in essence, the deal is sealed. It's important that the specifics are worked out to the grantor's satisfaction before implementing the trust.

The reasons for this type of trust are many-fold. It's to deal with your assets in a way that can save either yourself or your family both money and trouble. It can be beneficial in many ways. If you own an asset, say, that takes too much time and effort to manage, and doesn't carry it's weight as far as income, then this is a good prospect for your trust.

Another reason you may want to add an asset to your charitable remainder trust, could be to avoid some type of tax liability as discussed above. Or maybe the asset holds some sort of sentimental value to your family and this causes you to not want to sell it, then you can put it in the trust and utilize it in that fashion.

You can also use any of your assets in this trust in a way that creates an ongoing income stream for either yourself or a loved one. Actually it can be assigned to anyone of your choosing, whether family or not. It can be used to build and create substantial future tax savings by avoiding certain liabilities. It's also an excellent way to give to charities.

What these trusts do is protect your assets from creditors. They were created by the United States Congress and added as part of the tax code back in the late 1960s. They were originally intended to encourage gifting to benefit charities and research organizations. They're an excellent tool for financial planning and flexibility.

By knowing what a charitable remainder trust is, you gain a powerful financial tool that can really make a difference in your situation. It enables you to enjoy the benefits of a tax deduction and make a charitable gift at the same time, while also removing tax liabilities from your estate and generating an income. That's power my friend.

About the Author

You can learn quite a bit more regarding the charitable remainder trust by visiting the website. You will also find many other estate planning topics covered like the irrevocable trust and more.

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This Article Has Been Published on Fri, 13 Nov 2009 and Read 218 Times

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