About Charitable Remainder Trusts
A Charitable Remainder Trust (CRT) is a planned giving tool that allows donors to make a significant charitable impact while also providing financial benefits to themselves or their beneficiaries.
This type of trust is an irrevocable arrangement in which a donor transfers assets into a trust that is managed and invested by a trustee. The trust pays income to designated beneficiaries for a set number of years or for their lifetime, after which the remaining assets are distributed to charity.
Types of Charitable Remainder Trusts
Charitable Remainder Annuity Trust (CRAT):
Fixed income stream based on a percentage of the initial asset value
Income stream does not change over time
Charitable Remainder Unitrust (CRUT):
Variable income stream based on a percentage of the trust’s value, revalued annually
If assets appreciate over time, the income stream will also increase
Benefits
- Reduce or eliminate capital gains taxes
- Retain an income stream for yourself or beneficiaries
- Create a lasting legacy that supports our mission
How it works
- Transfer assets (such as cash, securities, or real estate) into a trust, which is managed by a trustee.
- The trust pays income to designated beneficiaries (such as you, your spouse, or other individuals) for a set number of years or for their lifetime.
- At the end of the trust term, the remaining assets are distributed to one or more charitable organizations.
- Receive an income tax deduction for the present value of the charitable remainder interest in the trust.
- You may also be able to avoid or reduce capital gains taxes on appreciated assets that are transferred into the trust.
Important Information About Charitable Remainder Trusts
Legal and Financial Considerations:
Charitable Remainder Trusts are irrevocable. Once established, the terms cannot be changed and assets placed in the trust cannot be retrieved.
The minimum recommended funding amount for a Charitable Remainder Trust is typically $100,000 due to setup and administration costs.
Charitable Remainder Trusts must pay a minimum of 5% annually to beneficiaries and are required to have a charitable remainder of at least 10% of the initial funding amount.
Trust administration requires ongoing management and annual tax filings.
Tax Implications:
Tax deductions are based on several factors including trust type, payout rate, term length, and IRS discount rates at the time of funding.
The actual income tax deduction will be less than the full value of your contribution, as it’s based on the present value of the remainder interest that will eventually go to charity.
While appreciated assets transferred to a CRT generally avoid immediate capital gains tax, income distributed to beneficiaries may be partially taxable.
Getting Started:
We strongly recommend consulting with your own legal and financial advisors before establishing a Charitable Remainder Trust.
Hospice of the Northwest Foundation can provide general information but cannot offer legal or tax advice specific to your situation.
Our staff can work with your advisors to help design a trust that meets both your financial goals and charitable intentions.
For more information about Charitable Remainder Trusts and how they might benefit you and Hospice of the Northwest Foundation, please contact us at (360) 814-5702 or foundation@hospicenw.org.
We’re here to help you meet your goals!
Our team would be happy to speak with you in confidence about your giving goals, with no obligation.
Name: Shelly Goss
Title :Stewardship and Annual Fund Manager
Phone: 360-814-5702
Email: mgoss@hospicenw.org
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