When it comes to outlining wishes for an estate plan, a person may have multiple goals. On one hand, he or she may hope to leave a legacy for family members. The person may also like the idea of supporting the work of a non-profit organization.
An estate plan may well dictate the distribution of assets after a person dies, but it may also help to provide the grantor with some income for the remainder of his or her life. A charitable remainder trust may offer options for all three scenarios.
The multiple benefits of a charitable remainder trust
With a charitable remainder trust, a person may title liquid or non-liquid assets to a trust and receive some form of a tax deduction for doing so. The trust may then provide an income to the grantor for a certain period of time. Once the grantor dies, any assets remaining in the trust may be distributed to one or more charitable organizations per the terms of the trust.
Fixed payments or percentage payments
A charitable trust may provide a set dollar amount to be paid to the grantor. This type of trust, also known as the charitable remainder annuity trust (CRAT), does not allow the grantor to add more assets to the trust once it has been established. If the grantor wishes to add assets to the trust over time, he or she may opt to create a charitable remainder unitrust (CRUT). The income received from this trust by the grantor may fluctuate as payments represent a percentage of the trust’s value.
Tax considerations
The Internal Revenue Service indicates that a settlement period may apply to some charitable remainder trusts upon the decedent’s death prior to it being considered a charitable trust by the IRS.
If you have questions about how a charitable remainder trust can be used to benefit your estate, contact an experienced estate planning law firm for more information.