Remainder Trusts
This is a tool that may empower you to reduce your liability for income and estate taxes and diversify your assets in a way that makes tax sense. It’s also an amazing way to give more money to charity then may otherwise be practical. Here's how it works.
A Charitable Remainder Trust is an irrevocable trust that makes regular payments to you, typically until you die, but it could be a term of years. What remains in the trust then passes to a qualified charity of your choice, sometimes a family foundation. A number of advantages may flow from the CRT.
First, there is current income tax charitable contribution deduction for the value of the charity's interest in the trust. The deduction is permitted when the trust is created even though the charity has to wait to receive anything.
Second, this kind of trust can increase your investment return. Because this trust pays no income taxes, it can usually sell an appreciated asset and not pay taxes on the gain. The trustee (which may be you) can then reinvest the full amount of the proceeds and generate larger payments to you for your life.
The trust will get an estate tax charitable deduction if it passes to one or more qualified charities at your death. If you wish to replace the value of the contributed property for heirs who might otherwise have received it, you may be able to with the help of a good financial advisor on your team.
A Charitable Remainder Trust is a complex arrangement and is not for everyone, but it is also an amazing tool in the right circumstances.