Charitable remainder trust

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Charitable remainder trust

An irrevocable trust that pays income to a designated person or persons until the grantor's death, when the income is passed on to a designated charity. A charitable lead trust by contrast allows the charity to receive income during the grantor's life, and the remaining income to pass to designated family members upon the grantor's death.

Charitable Remainder Trust

An irrevocable trust in which the grantor deposits assets with the income from the investment of these assets given to beneficiaries for a certain period of time. After the time expires, the remainder of the assets and income are donated to charity. A charitable remainder trust allows the grantor to provide for his/her survivors after death while reducing to a minimum the estate tax because the assets are ultimately directed to charity.

charitable remainder trust

A trust that pays an income to one or more individuals for a specified length of time then leaves the remainder of the trust to a designated charity. A charitable remainder trust can produce substantial tax benefits and is particularly suitable for use by a married couple with no children. Compare charitable lead trust.

Charitable remainder trust.

A charitable remainder trust (CRT) is an irrevocable trust designed to provide income to you or a beneficiary for either a fixed period or until the recipient dies. At that point, all remaining assets go to the charity named as ultimate beneficiary.

At the time you establish the trust, you can deduct the discounted present value of the assets as a charitable contribution. That value The value, which is calculated using IRS tables, may be less than the market value of these assets.

Transferring assets in a CRT not only reduces the value of your estate for estate tax purposes but also eliminates potential capital gains tax on any increased value of the assets.

References in periodicals archive ?
(7) While the existence of government-issue CRT forms should have substantially reduced the need for a qualified reformation regime, it appears, at least based on private letter rulings (PLRs) issued in this area, that practitioners continue to draft impermissible split-interest trusts. (8)
With the high annual operating and administration costs of split-interest trusts and private foundations, a donor may be looking for an easier planning technique that stops short of handing a check directly to charity.
These trusts made up about 6 percent of all split-interest trusts in 2012.
73-29, section 664 trusts, pooled income funds under section 642(c)(5), and all other split-interest trusts described in section 4947(a)(2) were required to file Form 5227.
Of the three types of split-interest trusts (SITs), trustees of charitable lead trusts continued to be the most likely to file either an initial or a final return, with returns for ongoing trusts making up 87.1 percent of the CLTs filed.
The operation of a split-interest trust typically involves one beneficiary-type (either charitable or non-charitable) receiving payments over a period of time, and then the other beneficiary-type receiving the remaining trust assets.
Interest and taxes remained the smallest deductions reported for split-interest trusts (Figure D).
Split-interest trusts, in which charitable and noncharitable beneficiaries have interests, can accomplish both purposes.
While the number of CRTs was relatively static at 115,754 in 2007--down slightly from the year before--the value of assets within them was considerable at nearly $96 billion in 2007, an increase of nearly 8% over 2006 ("Split-Interest Trusts, Filing Year 2007,, IRS Statistics of Income Bulletin, tinyurl.com/ck9s8d).
Figure F Transfer Method Used by All Donors, Taxable and Nontaxable, Gift Year 2008 Direct gifts 69.1% Family trusts [1] 5.9% Simple trusts 3.9% Split-interest trusts [2] 2.2% Qualified personal residence trusts 2.4% Other trust types [3] 16.4% [1] "Family trusts" includes children's trusts and bypass trusts.
* Charitable split-interest trusts are no longer required to file Form 1041-A, Trust Accumulation of Charitable Amounts, sections of which are now incorporated in Form 5227.
While this might be acceptable for the typical family or residuary trust, caution is needed when dealing with split-interest trusts that may be eligible for the marital or charitable deduction.