What is a charitable remainder trust?

Adam Keilen Estate Planning

A charitable remainder trust is an irrevocable trust that allows a donor to make a gift to a trust, then receive income from the trust during the donor’s lifetime. Upon the donor’s death, a trustee will distribute the assets to certain charities named in the trust. The key benefits to a charitable remainder trust are:

  • Income tax deductions;
  • The ability to sell assets without immediate capital gains; and
  • Reducing estate taxes (death taxes). See 26 U.S.C. § 664.

Oftentimes, appreciated assets are held in a charitable remainder trust; thus, no capital gain upon the sale. In other words, more money is available for reinvestment inside the trust. However, be careful to name a capable trustee. Charitable remainder trusts require strict trust administration-compliance. A competent trustee will help avoid compromised tax benefits, or tax penalties. Meet with your estate planning attorney to discuss a game plan for compliance.

In plain English. Generally, a charitable remainder trust is an irrevocable trust that creates an income stream with tax benefits; but upon your death, the money-asset goes to a charity (a charity with IRS tax exempt status) of your choosing.

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