Benefits of a charitable remainder trust

On Behalf of | Nov 3, 2020 | Uncategorized |

When a person wants to provide a substantial donation to a charitable organization after they die, a charitable remainder trust may be an option they consider.

In addition to supporting a cause close to a person’s heart, a charitable remainder trust also provides the ability to provide some financial support for other heirs, such as children or grandchildren.

Charitable remainder annuity trusts

As explained by SmartAsset, a charitable remainder annuity trust allows beneficiaries to receive a fixed annual income from a trust after the grantor passes away. Once the trust has been established, the grantor may not add more assets to it.

Charitable remainder unitrusts

A charitable remainder unitrust does allow a grantor to add more assets after the initial creation. Beneficiaries receive annual income that represents a percent of the trust’s value.

Distribution to a charity

After the beneficiaries die or when the terms of the trust expire, the remaining assets of the charitable remainder trust flow to the designated charity. A grantor may identify multiple charitable organizations to receive assets after the beneficiaries die or when the term expires.

Retirement account beneficiaries

According to Forbes, retirement account assets may essentially become part of a charitable remainder trust if the account owner names the trust as the beneficiary on the retirement fund. In some situations, this may ultimately provide beneficiaries with more income than if they were named as the beneficiaries of the retirement account itself. Income from a charitable remainder trust must be declared on tax returns and beneficiaries would pay income tax on the money received from the trust every year.