A lifetime gift to a charitable remainder trust can produce impressive tax and nontax results. A charitable remainder trust
is a form of irrevocable trust that involves annual distributions to one or more individuals (the “Beneficiary”) for life or for a
term of 20 years or less, at the end of which the balance of the trust value goes to charities as designated by the creator of
the trust.
The principal advantages of a charitable remainder trust are as follows: (1) the gift qualifies for a charitable income tax
deduction equal in value to the charitable remainder interest, (2) the gifted assets within the trust are exempt from federal
income taxes, so the trustee can sell any appreciated assets gifted at no tax cost and then reinvest the proceeds in a more
diversified portfolio, and (3) distributions from the trust to the Beneficiary will be made over time, thereby providing benefits
similar to those of a tax-exempt retirement plan.
Generally, for a high-income earner with a sizable taxable estate, the tax benefits alone make this trust strategy compelling.
Moreover, a charitable remainder trust can create a significant charitable impact for organizations that align with the trust
creator’s values and should be considered as part of any estate planning process that includes a focus on charitable gifting.