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Why a charitable remainder trust may be right for you

On Behalf of | Jun 15, 2021 | Estate Planning |

Giving to charity while at the same time generating income seems like an excellent way to put your savings into use. Many people in Connecticut are considering Charitable Remainder Trusts (CRT), although they lack a good understanding of how this vehicle works. A CRT is an irrevocable trust that potentially generates steady income for you or other beneficiaries of it. The remainder of the assets then goes to a charity of your choosing.

The good thing about this trust is that it allows you to convert appreciated assets, like real estate or stock, into income. When these assets are sold, you are not required to pay any capital gains tax. Additionally, the satisfaction that comes with donating to a charity is priceless.

How the trust works

You will be required to deposit assets into charitable remainder trusts. At this point, you will be referred to as the grantor. This trust will then sell your assets and invest the proceeds into income-generating investments, such as stocks and bonds.

You (the grantor) and other available beneficiaries will then start receiving periodic income from the trust. When the trust term expires, or the grantor passes away, the remainder of the assets is donated to a charity chosen by the grantor.

Examples of assets that you can transfer to a CRT

Assets that can be transferred to a charitable remainder trust include:

  • Money
  • Real estate
  • Publicly traded securities
  • Stocks in specific corporations

Benefits of a charitable remainder trust

This type of trust is a great way to reduce your tax liability, especially if you are in real estate. Additionally, these trusts can convert your appreciated assets into a lifetime of income generation activity.

Your assets are also safe from creditors once you deposit them in a charitable remainder trust. Furthermore, you tend to earn more income from your assets in a CRT than you would if you sell them on your own.

Leaving a legacy of philanthropy is a dream of many people. Well, a charitable remainder trust gives you a chance to do so while, at the same time, earn money.