Charitable Remainder Trust

Charitable Remainder Trust – A Smart Way to Give to Monarch Services

By Renée Snow, CFP, Monarch Services Board Member

Do you have highly appreciated assets that you are afraid to sell because you do not want to pay capital gains tax? Are you looking for a steady stream of income for your lifetime? Can you use a current year charitable deduction on your tax return? Do you believe in the services offered by Monarch Services?

If you answered yes to any of the above questions, you may want to consider a Charitable Remainder Trust (CRT). A CRT is an estate-planning tool that allows you to contribute assets to an irrevocable trust and then receive an annual payout from those assets during the life of the trust. CRTs can be established for either a term of up to 20 years or the lifetime of one or more individuals. The trust itself is a tax-exempt environment; therefore, assets can be contributed, sold and reinvested without triggering adverse tax consequences. The income payouts, however, are taxable as ordinary income. The assets remaining at the end of the trust term go to your favorite charity, hopefully Monarch Services. Donating assets to the CRT qualifies you to an immediate income-tax deduction equal to the present value of the estimated amount that will eventually pass to charity.

There are two main types of CRTs. One type, called a Charitable Remainder Unitrust (CRUT), pays out a specified percentage based on the fluctuating value of the trust’s assets each year. Alternatively, donors who desire a steady stream of payments may prefer the second type of CRT called a Charitable Remainder Annuity Trust (CRAT). Both types of trusts, CRUTs and CRATs, mandate donors to receive payouts of at least 5% but no more than 50% of the initial value of the contributed assets. They also require the present value of the charity’s interest to be at least 10% of the initial value of the contributed assets.

If you have any more questions or are curious about this way of donating to Monarch Services please call us at (831) 722-4532.