Benefits of the CRT

The Charitable Remainder Trust is a very good tool for income tax and estate tax planning.

  Alert! Warning!  You must have good advice (see Bob Parrish CPA) when you are transferring assets to the CRT or investing within the CRT.  You may create income tax inadvertently.  See the Page OUCH! WHY TAX?

When a person wishes to benefit both him or herself and charitable entities, s/he can use a charitable trust. The most common such trust is called a charitable remainder trust (CRT). Its name derives from the fact that the donor receives the income benefits ... and charity receives the remainder.

A gift of appreciated assets to a charitable remainder trust (CRT) can help you avoid a current capital gains tax on the sale of the appreciated assets and create immediate income-tax deductions on the charitable donation.

Reduces or avoids capital gains taxes. A CRT permits the trustee to sell appreciated assets without incurring Federal income tax on the gain.  Since there is more to reinvest ultimately there will be a longer income stream to the income beneficiaries (either you or your designated beneficiaries).

Achieves tax-deferred accumulation of earnings. Income and capital gains from CRTs are taxable only to the extent they are distributed to the taxable beneficiaries. Undistributed capital gains in the trust accumulate tax-free.  The trust instrument will determine how the capital gains are treated when distributions are made to the non-charitable beneficiary.

Provides Reinvestment Opportunities. The exception to the capital gains taxation of the sale of the appreciated property allows the trustee to reinvest the entire amount of the proceeds.  See your trust instrument or have your accountant (Bob Parrish CPA)  assist with the drafting of the trust instrument to know the tax treatment of the capital gains.