Charitable Remainder Trust; An Efficient Estate Planning Tool
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The Charitable Remainder Trust is one of the most efficient estate planning tools available to anyone holding assets that have experienced significant appreciation like Stocks, Real Estate, a Business, etc. An arrangement in which property or money is donated to a charity, but the donor continues to use the property and/or receive income from it while living. The beneficiaries receive the income and the charity receives the principal after a specified period of time. The grantor avoids any capital gains tax on the donated assets, and also gets an income tax deduction for the fair market value of the remainder interest that the trust earned. In addition, the asset is removed from the estate, reducing subsequent estate taxes. While the contribution is irrevocable, the grantor may have some control over the way the assets are invested, and may even switch from one charity to another. Charitable Remainder Trusts come in three types: charitable remainder annuity trust, a charitable remainder unit trust, and a charitable pooled income fund.
Charitable Remainder Trust (CRT) is a tax-saving alternative for people who want to make a substantial gift to a charitable organization. It can be a powerful tool for many individuals, especially those who have highly appreciated assets like stock or real estate. A Charitable Remainder Trust is an irrevocable trust. This means that once it is set up and a charitable gift is made, it cannot be undone. In order to realize its full potential, a Charitable Remainder Trust requires special legal, accounting and tax administration.
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Gifts to a Charitable Remainder Trust are made in cash, but more often consist of highly appreciated stock, real estate or a closely held business interest. In exchange for a charitable gift, the Charitable Remainder Trust pays income to the trust income beneficiary for a fixed period or for life. Some of the benefits a Charitable remainder trust offers are that it provides a current income tax deduction; it also creates an income tax for the donor that helps offset the donor's taxable income and defers capital gains taxes.
Because a Charitable Remainder Trust is tax-exempt, capital gains tax liability is deferred when the gifted appreciated assets are sold by the Charitable Remainder Trust. This allows the Charitable Remainder Trust to convert the full value of the asset into an investment that can provide a lifetime income for you and your spouse. Such a safe investment is a boon in the days of retirement. With so many option to look for in today's world, Charitable remainder trust is a safe and effective way of stocking your life's hard earned money. Spending the old age without having to depend and without having to pay taxes is every man's retirement dream.
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