Charitable Remainder Trust
One method of making a gift with a retained right to income is a charitable remainder trust. Let's look at some of the benefits a charitable remainder trust can provide:
- An income for you and/or your beneficiaries for life or a period of up to 20 years.
- An immediate and substantial income tax charitable deduction (subject to the annual AGI limitations).
- No capital gains owed on the transfer of long-term appreciated property to the trust.
- Reduction of your estate to avoid or reduce death taxes.
- Substantial reduction of probate costs, taxes, and other estate transfer expenses.
An Immediate Charitable Deduction
A gift to a charitable remainder trust generates an immediate income tax deduction, even though income is to be paid to the donor (and/or other beneficiaries) for life. The exact amount of the charitable deduction depends on the:
- value of the property transferred to the trust
- amount of income benefits that are payable each year to individual beneficiaries
- approximate length of time the income benefits will be paid
- interest rates prevailing at the time the gift is made
Despite the tax and financial benefits of a charitable remainder trust, you should consider this kind of arrangement only if you and your advisors determine it is compatible with your overall estate, tax, and financial plan.
Generally speaking, charitable remainder trusts are cost effective for gifts in excess of $100,000. If you want many of the advantages of a charitable remainder trust for an amount less than $100,000, you and your advisor might consider using our Pooled Income Fund, which is much more cost effective.