Building Your Legacy Through a Charitable Remainder Trust

For some clients, the thought of legacy extends beyond the confines of family. Donating time and money to community charities is one way to do that. An estate planning tool – the charitable remainder trust – allows people to donate while still retaining some important benefits.

A Most Useful Tool – the Charitable Remainder Trust.

Estate planning attorneys have many estate planning strategies and tools at their disposal, including trusts. For example, a trust may be a powerful way for individuals to reach their estate planning goals. With a charitable trust, the goal is to leave money to benefit a charity while the beneficiaries enjoy an income from the trust until death.

A charitable remainder trust works as follows:

  • A settlor creates the trust, then transfers the donated property to an irrevocable trust;
  • The trustee disburses a specified sum to the beneficiary for a set period of time or until the settlor’s death;
  • At the death of the settlor or the termination dictated by the trust document, the remainder of the trust assets transfers to the charity.

Two Types.

There are two basic types of charitable remainder trust, each with their own set of benefits.

Charitable Remainder Unitrust (CRUT).  The payment to beneficiary is calculated as a percentage of the donated property. The payment is recalculated each year based on the value of the trust principal.

Charitable Remainder Annuity Trust (CRAT). A fixed payment is made to the beneficiary every year, regardless of the trust principal.

Settlors of remainder trusts receive multiple benefits.

Benefits.

Under current tax law, settlors may receive a tax deduction for the year the trust was established. In addition, capital gains taxes can be avoided in some circumstances. For example, property that would result in capital gains taxes if sold could be used to fund a charitable remainder trust. The beneficiary receives income from the property through the life of the trust but does not have to pay capital gains taxes.

Charitable remainder trusts are irrevocable. This may mean estate tax relief for the settlor since the trust assets are no longer part of the settlor’s estate. Also, trust assets may be protected from most creditor claims because the settlor no longer controls them.

Would Your Estate Benefit from a Charitable Remainder Trust?

Always consider the benefits and the consequences of creating and funding a trust. If you are interested in giving back to your community, a charitable trust might be right for you.

Attorney John Mangan is board certified in Wills, Trusts & Estates by the Florida Bar. Please call us at 772-324-9050 or use our Contact Form to set up an appointment. We help clients throughout Florida, including Stuart, Palm City, Hobe Sound, Jupiter, and Port St. Lucie.

Written by John Mangan, Esq.

John Mangan, Esq.

I’m an attorney in Palm City, FL, and I serve clients throughout Martin County, including Stuart, Palm City, Hobe Sound, and Indiantown, as well as those in St. Lucie County, the Treasure Coast, Palm Beach County, and other parts of Florida. The Law Offices of John Mangan, P.A., is an innovative firm providing estate planning services to clients in Florida. We focus primarily on wills, trusts, asset protection, guardianship, and probate administration.