Charitable Remainder Trust (CRT)
When you begin to consider ways to preserve your estate for retirement, when you are faced with a windfall that will result in substantial taxes, when you need to find ways to pass your IRA or other qualified retirement plan on to others, you may want to consider establishing a charitable remainder trust with the B'nai B'rith Foundation of the U.S. A charitable remainder trust (CRT) is a deferred charitable gift that is designed to let you commit funds for B'nai B'rith in the future while preserving your financial security now. A CRT is irrevocable and is established under IRS regulations to provide substantial financial, tax and estate planning advantages.
Charitable Remainder Trust - Questions and Answers
Q. Is it possible to contribute property to B'nai B'rith and still retain income from it for the rest of my life?
A. What you describe is known as a charitable remainder trust. You may make a gift of cash, securities, real estate, tangible personal property or certain other property interests to a charitable remainder trust for the future benefit of B'nai B'rith and for your present benefit. You can retain the right to a fixed annuity in a specific sum or as a percentage of the initial value of the gift - at least five percent - for your lifetime or for a term of up to 20 years. What is more, under the annuity the right to receive income may include a survivor as well. The payments are often at rates higher than were available for the property before contribution. Tax benefits from charitable remainder trusts include an income tax charitable deduction based on a portion of the value of the property or cash contributed to the trust. Other advantages are avoiding recognition of capital gain on the disposition of appreciated long-term assets and removing the value of the contributed property from your taxable estate.
Q. Is it difficult to establish a charitable remainder trust?
A. No. An experienced representative of B'nai B'rith will work with you and your professional advisors to help you establish a charitable remainder trust. What is more, you will be able to take advantage of two different types of charitable remainder trusts: An Annuity Trust pays an annual fixed amount of income of at least five percent of the value of the donated assets when contributed to the Trust. Once established and funded, there will be no adjustment to the annuity payments as a consequence of market conditions. A Unitrust pays a fixed percentage (also at least five percent) of the trust principal as revalued annually. When the trust principal grows, the payments grow proportionately to the stated rate as a hedge against inflation. Certain unitrusts may be appropriate to receive gifts of real estate in order to enable individuals to increase income productivity from this type of investment, avoid tax on the long-term capital gain and permit the trustee to the sale of the real estate to maximize its value to the beneficiaries of these unitrusts.
Q. Does a charitable remainder trust offer any other benefits?
A. Yes. You can generally achieve greater overall economic benefits by contributing an asset to a charitable remainder trust than by retaining it in the estate for distribution to heirs. Since you might have originally intended that the contributed asset go to your heirs, you can take advantage of the financial and tax benefits which result from the creation and operation of the trust and replace the value of the asset for your heirs, perhaps through the use of a life insurance product or deferred gift annuities. Often, your heirs will receive the life insurance proceeds, for example, as a replacement asset free of both gift and estate taxes, thereby receiving a distribution of greater value than had they inherited the property from you. This often enables a family to have a "win-win" result from the use of a charitable remainder trust.
Q. Can I use a charitable remainder trust as a planning vehicle to shield my retirement plan from the large amount of taxes to which it may be exposed at my death?
A: Yes, either as part of a plan during your lifetime or through a designation to take effect at the end of your lifetime. You can withdraw all or a portion of the plan after you reach the threshold age (59-1/2) and place the net amount (after taxes, which are partially offset by your charitable deduction) in a charitable remainder trust. The Trust will pay you income for the rest of your and your survivor's lifetimes, and you may choose to use this income to replace a substantial portion of the value of the assets withdrawn from the plan, thereby benefiting your heirs without estate and other taxes. You can also accomplish this by creating a testamentary charitable remainder trust, funding it with assets in your qualified retirement plan by designation, and, if your spouse is the beneficiary, generally avoiding both estate and income taxes.
For more information about charitable remainder trusts, please contact the B'nai B'rith Foundation of the U.S. by phone (800-656-5561), by email firstname.lastname@example.org by mail at B'nai B'rith Foundation of the U.S., 2020 K Street, N.W., Washington, D.C. 20006.