What is a Charitable Remainder Trust, and How Does it Work?

A Charitable Remainder Trust (CRT) is a type of irrevocable trust where assets are transferred to the trust, and beneficiaries receive income from the trust for a specified period of time. At the end of the trust term, the remaining assets are donated to one or more charitable organizations.

How Does it Work?

When you set up a CRT, you transfer assets such as cash, securities, real estate, or other investments to the trust. The trust then pays income to the named beneficiaries, who can be you, your spouse, or other individuals, for a set number of years or for their lifetime.

Upon the termination of the trust, the remaining assets are distributed to the chosen charitable organization(s) as specified in the trust agreement. This allows you to support charitable causes while providing income to beneficiaries.

Benefits

There are several benefits to setting up a CRT, including tax benefits, asset protection, and the ability to support charitable causes. CRTs can help with estate planning, financial planning, and philanthropy by allowing you to make charitable donations while receiving income for yourself or your beneficiaries.

There are two main types of CRTs: Charitable Remainder Annuity Trust (CRAT) and Charitable Remainder Unitrust (CRUT). Each has its own unique features and benefits, so it's important to consult with a financial advisor or estate planner to determine which type of CRT is best suited to your financial goals and charitable intentions.