How a Charitable Remainder Trust Might be Right for You

A charitable remainder trust (CRT) provides the ability to control income flow as needed, which is very helpful when it comes to retirement planning.  Given the current economy’s uncertainty, many may be reluctant to make donations to charity in case they encounter cash-flow problems in the future.  However, many charities are also facing financial setbacks and need more support now than ever before.  A CRT may be the answer for those who are charitably inclined but concerned about having sufficient income for the future.

A CRT has the ability to fund the charity of your choice while potentially boosting cash flow, shrinking the taxable estate, reducing or deferring income taxes, and providing investment planning advantages.  CRTs are irrevocable trusts which provide you, and potentially your spouse, with an income stream for life or a term of up to twenty years.  Upon termination of the trust term, the remaining trust assets are distributed to the charity, or charities, of your choice.

Among other advantages, CRTs helps to facilitate tax-efficient investment strategies.  For example, rebalancing your portfolio typically generates taxable income; however, contributing those assets to a tax-exempt CRT allows investors to freely reallocate assets without undue concern about immediate tax consequences.  CRTs are also helpful in selling highly appreciated assets that would generate substantial immediate capital gain and capital gain taxes.  Rather than selling those assets, contributing them to a CRT and allowing the trustee to sell them allows for reinvestment of the proceeds in more diversified assets with greater returns unburdened by capital gains taxes.

While CRTs offer a great deal of flexibility and retirement planning advantages, they require careful planning and solid investment guidance to ensure proper structure and funding.  If you are interested in learning more about retirement and estate planning, please contact the experienced estate planning attorneys at Lonich Patton Ehrlich Policastri for further information.  Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may include legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.