A charitable remainder trust (or a CRT) is a tax-exempt trust that is often used to reduce taxable income. A CRT benefits charities while providing an income stream during the life of the beneficiary. Upon the death of the last-living beneficiary, or after a set amount of time, the remainder of the trust assets are distributed to a charity or charities.
There Are Two Kinds of CRTs
There are two kinds of CRTs: a charitable remainder unitrust (CRUT) and a charitable remainder annuity trust (CRAT). Both kinds of CRTs are irrevocable. An annuity trust distributes a fixed annuity annually based on the fair market value of the assets in the trust when the trust is created. A unitrust distributes a fixed percentage in income that is based on the fair market value of the assets each year and therefore the income will vary.
Why Have a CRT?
A charitable remainder trust can be used to:
- Convert appreciated assets into an income stream – this can defer payment of assets and turn them into income for retirement.
- Charitable Giving – with a donor-advised fund a CRT can provide control to the donor for the amount and timing of distributions and possibly provide a charitable income tax deduction to reduce taxes owed.
- Defer Capital Gains – appreciated assets are deferred in taxation until transfer to the income beneficiary that spreads the tax burden out over time.
- Reduce or Eliminate Estate Tax – as an irrevocable trust the funds in the trust are a present interest gift and removed from your taxable estate.
Can I Modify a Charitable Remainder Trust?
Since the trust is irrevocable, you cannot add to it, change it, or remove assets from it unless you have permission from the beneficiaries. The beneficiaries are those you choose to receive the disbursement and the charities you name in the trust. Essentially, once you transfer assets to the trust, you remove your ownership right to those assets since you no longer control them.
Contact a Georgia Probate Attorney
If you need to create or revise an estate plan, contact our Georgia estate planning attorneys today at Grissom Law, LLC.
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