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What in the World is a CRT? Demystifying the Charitable Remainder Trust…
There is an old saying, “There’s more than one way to skin a cat.” Well, as antiquated and irrelevant as that phrase may seem to us today, it does speak volumes about a professional approach to estate planning.
In working with clients every day, I must keep in mind the diversity of their motivations, goals, and their need or desire for increased income on their assets. In connection with their needs or desire for increased income, one option in the right situation is a charitable remainder trust (CRT). After a brief explanation of a CRT the clients’ reaction is usually, “That’s too good to be true.”
This “charitable question” has become a thought-provoking way to introduce the notion of a charitable gift with the donor reserving to the donor a lifetime income. Individuals who have assets and no living heirs or those who have assets with limited liquidity are often interested in a way to establish a trust that can provide income distributions during their lifetime while also providing a charitable deduction. If a client is charitably-inclined, then a CRT satisfies this goal in providing a remainder interest to a charity or charities of the donor’s choice. In some instances, you can even leave a life income stream to a relative and still satisfy the charitable goal.
Charitable remainder trusts are a satisfying vehicle for those wishing to:
•
transfer assets
• receive a partial income tax deduction
• have assets sold by the trustee and reinvested in a diversified portfolio
• minimize the capital gain on appreciated assets such as stock and real estate
• receive quarterly income distributions
• create a legacy gift with the balance of the trust transferred at death
Several of my clients have chosen to work with The Winston-Salem Foundation in structuring these trusts by designating the remainder for an endowment at the Foundation that endures to support a variety of charitable interests in perpetuity. One client transferred title to family property, thus allowing the Foundation to sell the property within the trust while creating an income distribution for the client. Another used cash received as inheritance as the basis for a life income trust. In both instances, the goals and charitable interests differed, while the vehicle for achieving them was the same.
The Winston-Salem Foundation is a particularly attractive vehicle to establish an endowment because of its (?)eighty year history. Also, with over $200,000,000 in assets, the Foundation is able to negotiate effectively with financial institutions in the investment of the funds it holds, especially in the areas of accountability and fees. By establishing an endowment at The Winston-Salem Foundation, the donor has the flexibility of changing the charitable beneficiary in the event the donor chooses to do so.
The Charitable Remainder Trust is a tool you should consider and discuss with your attorney or other professional advisor - it may be the perfect vehicle to achieve your financial planning goals, especially in the area of income needs and charitable giving.
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