Charitable Remainder Trusts: The Benefits Of Giving
When you are planning for your golden years and the end of your life that ultimately lies in wait you will have a number of very specific objectives. For one thing you want to make sure that your assets are not eroded unduly be various forms of taxation. You are also going to need to have a solid cash flow to keep you comfortable while you enjoy your retirement years. And lastly, you must plan out the distribution of your assets after your death, and for many people this included charitable giving.
Depending on the specific nature of your resources, you may be able to achieve all of these objectives, at least in part, through the creation of a charitable remainder trust. These trusts work best when you fund them at least in part with appreciated securities, because the contribution and subsequent earnings are not subject to capital gains taxes.
To obtain ongoing income you name yourself as the beneficiary, and you can also act as the trustee should you so desire but many people will use a bank or trust company. You must receive annual distributions totaling at least 5% but not more than 50% of the fair market value of the trust. These payments will be made for the duration of the trust agreement, which can be through to the end of your life if this is what you would prefer.
Aside from the capital gains tax advantage, the charitable remainder trust provides estate tax efficiency because the value of your estate is reduced by the contribution into the trust. No gift tax is applicable because aside from the charity, you are the one benefiting from the assets placed into the trust. At the end of the trust term the charity you chose when you created the trust receives the remainder, which was of course tax deductible for the year in which the trust was created.
