To benefit a charity while helping ensure your own financial future, consider a charitable remainder trust (CRT):
- For a given term, the CRT pays an amount to you annually (some of which generally is taxable).
- At the term’s end, the CRT’s remaining assets pass to one or more charities.
- When you fund the CRT, you receive an income tax deduction for the present value of the amount that will go to charity.
- The property is removed from your estate.
A CRT also can help diversify your portfolio if you own non-income-producing assets that would generate a large capital gain if sold. Because a CRT is tax-exempt, it can sell the property without paying tax on the gain at the time of the sale. The CRT can then invest the proceeds in a variety of stocks and bonds. You’ll owe capital gains tax when you receive CRT payments, but because the payments are spread over time, much of the liability will be deferred.
You can name someone other than yourself as income beneficiary or fund the CRT at your death, but the tax consequences will be different.
If you’re charitably inclined but also would like to provide an income stream for yourself or your loved ones, a CRT may be right for you. Please contact us with any questions.