Including a Charitable Remainder Trust in Your Estate Plan

 Posted on October 18, 2024 in Estate Planning

Creating an estate plan can be difficult for several reasons. First, there is the emotional aspect of making plans for a time in the future when you will either be incapacitated or no longer living. Second, it can be complicated to sort through all the possible arrangements you can make. Many people struggle to articulate exactly how they want to leave a legacy, and are often unsure how to benefit both their loved ones and important causes they support. A knowledgeable Flower Mound, TX estate planning lawyer can help you navigate this problem by working with you to create a charitable remainder trust.

What Is a Charitable Remainder Trust?

When people establish trusts and other ways to leave money to beneficiaries, there is a concern that taxes will be levied on any inheritance. One way to avoid saddling beneficiaries with hefty capital gains taxes is by setting up an irrevocable trust called a charitable remainder trust (CRT), which lets you accomplish three things:

• Receive an income

• Support a charity

• Benefit from some tax advantages

This income received from a CRT can be arranged for a specified period or the rest of the beneficiary’s life. The donor gets a tax deduction for giving money to charity and there are no taxes when the assets in the trust are transferred. 

How Does a Charitable Remainder Trust Work?

While it can seem confusing, a CRT is quite simple to manage. 

• First, you decide which assets you wish to transfer into the trust. Options can include cash, stocks, or even real estate. 

• Once a CRT is established, you or anyone else you designate can receive income from it. The trust will pay the beneficiary for whatever amount of time you decide. It can be anywhere from several years to the rest of the beneficiary's life.

• When that period ends, meaning the number of years you established the trust for has ended or the beneficiary dies, whatever assets remain in the trust go to a charity of your choosing.

As the person creating the trust, you can benefit from tax deductions when you set it up and avoid capital gains taxes when you receive assets from it.

Contact a Denton County, TX Estate Planning Attorney

If you are thinking about the smartest way to arrange your assets to benefit you and your loved ones, speak with a qualified Flower Mound, TX estate planning lawyer about whether a charitable remainder trust is a good idea for you. At Colbert Law Group PLLC, we are dedicated to providing our clients with all the information they need to make personalized choices. Call us at 972-724-3338 to schedule a private consultation.