Charitable Remainder Trusts
Information about Charitable Remainder Trusts
What is a Charitable Remainder Trust?
A Charitable Remainder Trust (CRT) is a form of irrevocable trust that is utilized to avoid the capital gains tax on the sale of a major asset, e.g. an apartment building, ranch, commercial property, etc. At the same time it provides a major tax benefit for the Donor (the person who creates the Trust) as well as an income stream in the form of an annuity. Finally, the CRT enables the Donor to make a substantial gift to his or her favorite charity.
The process of creating a CRT is fairly straight forward. The asset is transferred to the CRT which in turn sells it and uses the proceeds to purchase an annuity for the Donor. Upon the Donor's death the balance of the CRT goes to a charity designated by the Donor. Because the CRT is tax exempt, it does not pay a capital gains tax on the sale, and the Donor receives a tax deduction for his charitable contribution.
Another benefit of a CRT is that the Donor can determine the length of the annuity payout - choosing up to 20 years or until his death. In addition the Donor may select one of two types of CRTs:
- a Charitable Remainder Annuity Trust (CRAT) which pays the Donor a fixed dollar amount every year OR
- a Charitable Remainder Unitrust (CRUT) which pays the Donor a fixed percentage of the entire value of the trust annually
- A CRT is the perfect estate planning solution for the owner of a highly appreciated asset who wishes to avoid capital gains tax, increase his cash flow, and benefit his favorite charity.
- As is true of all tax avoidance devices, CRT's are scrutinized by the IRS to insure that they are in compliance with federal laws and IRS Regulations. For that reason it is important to obtain the assistance of experienced and competent legal counsel to prepare the documents and to guide you through the CRT process.
Estate Planning Attorney in Denver
Are you considering establishing a Charitable Remainder Trust?
The Law Office of James A. Littlepage provides detailed and personalized
estate planning services to individuals throughout the Denver area and other front range communities, including the preparation of Charitable Remainder Trusts. To obtain knowledgeable legal assistance in forming a Charitable Remainder Trust that is tailored to fit the needs of your situation, contact us.
Contact a Denver estate planning attorney who can provide legal guidance and information to clients who are seeking to establish a charitable remainder trust.