A charitable remainder trust (CRT) is a great way to give to a cause you care about while securing financial benefits for yourself, your estate and your loved ones. Here is how it works.
Once you create a CRT and place assets like money, stocks or property into it, the trust pays you or your chosen beneficiaries a steady income for a set time. It could be throughout your lifetime or a specific number of years. After that, any remaining assets are donated to a charity of your choice, which is how the trust gets its name.
The benefits of CRTs in estate planning
One of the key benefits of CRTs is the significant tax advantages they offer. For instance, a CRT can sell appreciated assets without triggering capital gains tax. This allows the trust to reinvest the proceeds more efficiently, potentially generating more income for you or your beneficiaries.
A CRT also provides a steady income for a set term or lifetime. This makes it particularly useful for retirees or those planning for a reliable financial future. You may also qualify for an immediate income tax deduction when you fund the trust.
Lastly, the assets in a CRT are not considered part of your taxable estate, which can lead to substantial tax savings for your heirs.
Seek personalized guidance
There are different kinds of CRTs, each with unique features and payout structures, so it’s important to understand how they work before moving forward. Choosing the right trust tailored to your specific goals and situation while complying with legal requirements is essential. Reaching out for legal guidance can help you make the most of CRTs and other estate planning tools to secure your legacy and protect your interests.