Everybody in the world is connected to each other in one way or another through global human society. For many this truth is a driving force for how they live their lives. If this is the case for you it might be important to you that you leave a legacy behind that reflects your compassion for others and their suffering. This is why many people make sure that when they die their assets and capital left behind go to help those in need.
One way to ensure your assets are distributed in the way you like, including to the causes you support, is through having a comprehensive estate plan in place. There are various options for formulating an estate plan that can accomplish these goals. One way to ensure your cherished causes are benefitted when you die is through the use of a charitable remainder trust.
What is a charitable remainder trust?
The objective of a charitable remainder trust is to obtain tax benefits while also ensuring your favorite charitable organization receives support when your estate is distributed after you have passed away. This type of trust is an irrevocable trust which means that it cannot be altered or terminated by you once it has been formed and you have put assets into it. You will be able to deduct the assets you contribute to the trust in order to lower your taxable income for the year.
Charitable remainder trusts will distribute assets to your intended beneficiaries for a specified period of time. The remainder of your assets after this period of time is then donated to the charitable organization of your choice.
What does “irrevocable” mean?
The irrevocability of a charitable remainder trust means that only with the permission of your beneficiary can the trust be amended or modified. This is in contrast to a revocable trust which allows you to modify the trust at your discretion. Therefore, when contributing to a charitable remainder trust be sure to understand you are giving up your ownership rights to the assets contributed.
Different types of charitable remainder trusts
You can choose from two variations of charitable remainder trusts. Each has different methods of distribution of assets. You have the option of choosing either a charitable remainder annuity trust (CRAT) or a charitable remainder uni-trust (CRUT).
With a CRAT the funds are distributed to your beneficiary via an annuity that pays out a fixed amount annually. On the other hand, a CRUT will pay a fixed percentage of the current trust balance on an annual basis. Another difference between these two types of charitable remainder trusts is that a CRAT allows you to make additional contributions while this is not permitted with a CRUT.
Is a charitable remainder trust a good idea?
Integrating a charitable remainder trust into your estate plan is just one option for you to plan for the administration of your estate after you have passed away. There could be other options you may want to explore that could also ensure your assets are distributed to your intended beneficiaries while also allowing you to support the causes you care about. Regardless of which estate planning strategy you choose, make sure that it meets your objectives as well as fits your individual circumstances.