Charitable Remainder Trusts (CRTs)
A CRT is an irrevocable trust that allows you to make a deferred charitable gift and receive an income tax deduction in the year in which the trust is established. A CRT actually provides for and maintains two sets of beneficiaries. The first set are the income beneficiaries (you and, if married, a spouse). Income beneficiaries receive a set percentage of income for your lifetime from the trust. The second set of beneficiaries is the non-profit you name. They receive the principal of the trust after the income beneficiaries pass away.
Capital Gains
Because their assets are destined for a non-profit, CRTs do not pay any capital gains taxes. These taxes can range from 10% to 20% of an asset’s growth in value. For this reason, CRTs are ideal for assets like stocks or property with a low cost basis but high appreciated value.Income and Estates Taxes
A CRT is considered “outside of your estate” by the IRS. Because of this, you may end up saving as much as 48 cents of every dollar you move to the CRT. Because CRTs benefit a charity, you also qualify for an income tax deduction. The amount of your deduction is the present value of the remainder interest to the charity.