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Charitable Remainder Trust FAQs

Posted by Chris Peterson | Jun 03, 2014 | 0 Comments

Charitable Remainder Trust FAQs

charitable remainder trust faqsThe charitable remainder trust is an effective tool for managing assets in an estate and avoiding certain tax liabilities. CRTs by their nature limit the assets that can be left to beneficiaries because a percentage must remain to be donated to a charity. For many, however, this tool is ideal. A estate planning lawyer in College Station can explain in fuller detail whether a CRT is appropriate for your needs, but the following are answers to some frequently asked questions.

What Exactly Is a Charitable Remainder Trust?

This type of trust is set up with the assistance of a estate planning lawyer in College Station. The settlor, or creator of the trust, may use a portion of the assets during his lifetime. When he passes, named beneficiaries receive a percentage of the assets periodically. The remainder of the trust then passes to a charity named by the settlor.

What Is the Minimum That Must Be Held for Charity, and How Much Can a Beneficiary Receive?

There are actually three types of charitable remainder trusts: the unitrust, annuity trust, and pooled income fund. The exact distribution to beneficiaries depends on the type of CRT that is set up, but as a rule of thumb a beneficiary receives between 5% and 50% of the total assets held in trust. At least 10% of the assets must remain in the CRT for donation to the named charity. It is worth noting that this percentage is based on the value of the CRT at the date assets are placed in trust by the settlor.

Can Beneficiaries Be Added or Removed?

One of the limiting aspects of a CRT is that income beneficiaries cannot be added or removed. The way to avoid this issue is to add heirs as contingent beneficiaries. These individuals can be removed by order of the settlor's will.

What Are the Tax Advantages?

Under the IRS Code, Section 664, the rules for qualifying as a CRT are established. The settlor will receive an income tax deduction for the tax year when the contribution was made. This is based on the present value of the remainder that will eventually be left to charity. This is a simplification, and you should speak with your attorney to gain a more detailed explanation.

Who Should I Call for Legal Assistance?

If you are considering a charitable remainder trust, or need guidance with planning your estate, it is important that you work with an experienced and knowledgeable estate planning lawyer in College Station. Call Peterson Law Group today to arrange a consultation at 979-703-7014.

About the Author

Chris Peterson

Chris Peterson is the owner of Peterson Law Group. He practices primarily in the areas of wills, trusts and estate planning; probate and trust administration; elder law; and business law. Chris is also the owner of Brazos 1031 Exchange Company.


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