Quick Notes: Charitable Remainder Trusts and Estate Planning.

A quick tidbit on Charitable Remainder Trusts (CRTs) as part of estate planning...

You can donate various kinds of property including cash, stocks, real estate and life insurance to charitable organizations of your choice.

One way to do this is to set up a Charitable Remainder Trust (CRT).

A CRT is when cash or property is donated during your life or at death to an irrevocable trust.  The irrevocable trust makes a fixed payment (at least annually) to you (the donor) and/or other beneficiaries for her/his/their life or lives or a specified term of not more than 20 years.

The amount of the annual payment can be either (1) the same each year based on an fixed percentage of the initial value of the trust assets or (2) a variable based on a fixed percentage of the trust assets computed each year. There are minimum payment rates to be concerned with.

The charity or charities will receive any remaining trust assets at the end of the payment term.

So, in other words, you set up a CRT and designate your favorite charity. You transfer ownership of your property to this trust. You decide on annual payments in a fixed amount for 10 years based on the earnings of your property (could be cash or real estate or...).  Then at the end of 10 year period, the charity will have complete ownership of the property to do as they wish.

A CRT is an irrevocable trust meaning that you give up all ownership and control over the property in the trust.

There are no contribution limits.

The level of complexity to set up a CRT is high.

There may be annual fees involved including trustee, investment, management, administration and tax preparation fees in maintaining the CRT.

For more information, consult with an estate planning attorney.