Selecting a Charitable Remainder Trust Attorney

Charitable remainder trusts (CRTs) are legal entities offering charitable and financial advantages. CRTs enable individuals to secure a lifetime income stream for themselves or their heirs while benefiting their chosen charities simultaneously. If you’re considering setting up a charitable remainder trust, consulting with an experienced attorney is recommended for guidance. This article will give an overview of CRTs: what types are available, their advantages when setting one up, and how to select an experienced charitable remainder trust attorney.

What is a Charitable Remainder Trust?

A charitable remainder trust is an entity that allows individuals to donate assets and receive a tax deduction while still receiving income for themselves or their heirs. Assets in the trust are invested, with the trustee paying out a percentage of their value each year as dividends to beneficiaries. When the term ends, the remaining assets are distributed back to designated charitable organizations.

Types of Charitable Remainder Trust

There are various types of charitable remainder trusts, such as:

• Charitable Remainder Annuity Trust (CRAT): A CRAT pays beneficiaries an annual annuity based on a percentage of the trust’s initial value each year. The annuity rate is established at the beginning and cannot be altered.
• Charitable Remainder Unitrust (CRUT): A CRUT pays a percentage of the trust’s value annually to beneficiaries, based on what the trust had at its beginning each year, and subject to fluctuation over time.
• Net Income with Makeup Charitable Remainder Unitrust (NIMCRUT): A NIMCRUT pays out the lesser of a fixed percentage of its value or actual income earned yearly. If earnings fall short of this fixed percentage, additional payments can be made in future years when more income is earned.
• Flip Charitable Remainder Unitrust (Flip CRUT): A Flip CRUT allows the donor to defer income until a future date, such as when their property is sold. At that point, it converts back into a standard Charitable Remainder Trust and begins making payouts again.

Benefits of a Charitable Remainder Trust

Charitable remainder trusts provide donors with many advantages. One is deferring income until after an event such as a property sale; they allow them to defer income until certain milestones are achieved.

Establishing a charitable remainder trust has several advantages, such as:

• Tax Benefits: Donors receive an immediate income tax deduction for the value of assets donated to a trust. Furthermore, those assets grow tax-exempt, and no capital gains tax is due when sold.
• Income Stream: The trust’s beneficiaries receive a regular income for an established period, enabling them to supplement their retirement funds or provide for their heirs.
• Estate Planning: By transferring assets to a charitable remainder trust, donors can effectively remove those items from their estate and reduce potential estate tax obligations.

Please take note: When considering charitable remainder trusts and other estate planning strategies, it’s essential to remember that the legal and financial landscape is constantly shifting. Tax laws, investment options, and charitable giving regulations can change over time, potentially impacting the effectiveness of your charitable trust. 

Setting Up a Charitable Remainder Trust

Setting up a charitable remainder trust can be done in several steps and involves transferring your existing assets into the trust.

Establishing a charitable remainder trust involves several steps, such as selecting an appointed trustee. The trustee is accountable for managing the assets in the trust and distributing income to beneficiaries. Donors can choose an experienced professional like a bank or trust company or act as their trustee.

Select Charitable Beneficiaries

Donors can select one or more charitable organizations as beneficiaries of their trust assets. However, these organizations must be recognized as tax-exempt under Section 501(c)(3) of the Internal Revenue Code for these gifts to be tax-deductible.

Determining the Income Interest and Term of the Trust

Donors must decide how much of their trust value will be distributed annually to beneficiaries and for how long.

Transfer Assets to the trust

Donors must transfer assets such as cash, stocks, or real estate to a trust. The trustee then manages and invests these assets for beneficiaries’ income needs.

Hiring a Charitable Remainder Trust Attorney

When setting up a charitable remainder trust, it’s essential to consult with an experienced attorney who can offer guidance and guarantee the trust is set up correctly.

Here are some reasons why hiring a charitable remainder trust attorney might be beneficial:

a. Why Hiring an Attorney Is Beneficiary: A trust attorney can assist in navigating the intricate legal and tax issues involved in setting up a charitable remainder trust. They ensure that it complies with state and federal regulations, with qualified beneficiaries eligible for donations.

b. Qualities to Look For in an Attorney: When selecting a charitable remainder trust attorney, seek someone with expertise in estate planning and trust law. Furthermore, they should have an in-depth knowledge of the tax implications associated with charitable giving.

c. Questions to Ask When Hiring an Attorney: When interviewing a charitable remainder trust attorney, some questions to consider include the following:

• How long have you been practicing estate planning and trust law?
• What is your experience with charitable remainder trusts?
• Can you provide references from clients who have successfully set up charitable remainder trusts with your assistance?
• What are the fees associated with setting up a charitable remainder trust?

Establishing a charitable remainder trust can offer financial advantages and the satisfaction of supporting an important charity. By consulting with an experienced attorney, donors can ensure their donations are structured in the most advantageous way possible.

FAQs

Q: How much minimum assets must be contributed to creating a charitable remainder trust?

A: While no set amount is required, most donors opt to contribute at least $100,000 worth of assets.

Q: Can a charitable remainder trust be altered or revoked once established?

A: In general, charitable remainder trusts cannot be altered or revoked once created. However, there are exceptions to this rule, such as cases of fraud or mistake.

Q: Can a charitable remainder trust be set up to benefit multiple charities?

A: Yes, donors have the option to split the income stream between multiple charities or designate a percentage to each.

Q: How is the income stream from a charitable remainder trust taxed?

A: Income received from such trusts is taxed as ordinary income to its beneficiaries.

Q: Can a charitable remainder trust be created to benefit both charities and individual beneficiaries, such as family members?

A: Absolutely. With this type of trust, income can be distributed between both charitable organizations and individual beneficiaries like family members.

Why Choose us:

At Hess-Verdon & Associates, our highly experienced attorneys specialize in estate planning and trust law – including charitable remainder trusts. With an intimate knowledge of the legal and tax ramifications associated with charitable giving, we can offer personalized guidance to ensure your charitable objectives are achieved efficiently and effectively. Our team has a demonstrated success record setting up charitable remainder trusts that provide significant financial rewards for our clients while supporting causes close to their hearts. With our expertise and commitment to personalized service, you can rest assured knowing your giving structure maximizes all parties involved.