Many people want to leave money to a charity in their will, but also need to reduce the taxes on their assets. A charitable remainder trust, CRT, is a tax-exempt irrevocable trust that generates income for the creator while reducing the taxable income of individuals and supporting charities. After the trust creator’s death, the remaining assets in the trust go to support one or more of their favorite charities. Many people consider a charitable remainder trust as a win-win-win situation for the creator, their beneficiaries and their favorite charities!
1. A charitable remainder trust is an irrevocable trust, which means that once it is created, the trust cannot be canceled. However, it may be possible to change the beneficiary of the trust if the creator decides to support a different charity.
2. A CRT generates income for the creator of the trust in 2 different ways:
1. If the income is based on a percentage of the trust, it is known as a “unitrust.”
2. If the income is set as an annual fixed amount, the trust is often called an “annuity” trust.
3. A charitable remainder trust helps avoid capital gains taxes. If the trustee sells assets that have appreciated substantially in value, no capital gains tax accrues.
4. Assets placed in a CRT are not part of the creator’s estate and not subject to estate taxes. Instead, the assets would pass directly to the creator’s chosen charity.
5. The creator of the trust can also be the trustee of a CRT, which enables the trust creator how to invest trust assets.
A charitable remainder trust provides many benefits to the creator, their charities and their heirs, but because it is an irrevocable trust, you should consult an experienced trust and estate planning attorney. Based on a full review of your goals, assets and tax situation an estate attorney might recommend alternatives to a CRT.
Do you have questions about a charitable remainder trust? Our experienced estate and probate attorneys in Cook, Dupage, Kane, Lake, and Will counties in Illinois can advise you on the best options to protect your assets and loved ones. To talk to a trust attorney contact the Estate & Probate Legal Group at 630-868–9100.
