Tampa Charitable Remainder Trusts Attorney
Charitable Remainder Trust Defined
A charitable remainder trust, or CRT, is a type of trust designed to help you gain a tax advantage while also contributing to your favorite charitable organization. Basically, a CRT allows you to put a large sum into trust, while receiving a portion of that money back for a specified period of time (usually, the end of your life). When that period is over, the remainder of the money in the trust will be contributed to a charity of your choice. There are a number of financial benefits to be had through the use of a CRT.
Setting up a trust can be a complex process. This is particularly true when creating a CRT. Because of these complexities, you should consult with an experienced estate planning attorney. Since CRTs heavily involve federal tax law, it may be helpful to contact a trusts lawyer with tax experience. Your attorney can explain the process of setting up a CRT and your resulting benefits.
CRTs require the gift of appreciated assets, such as stocks or bonds. Because a portion of the trust amount will ultimately become a charitable donation, you will receive an income tax deduction. This deduction is based on the approximate present value of the remaining assets. In other words, the value of the actual monetary donation (whatever is left in the trust) will be your income tax deduction.
In addition to the income tax deduction related to the initial gift, you will also receive a tax advantage on future income from the trust. CRTs typically require a minimum gift of $100,000. The gift will be placed in trust, and managed by a trustee. Based on the specific terms of your trust, you will receive a portion of the trust assets as income. Instead of paying a normal income tax rate on this, you will receive a reduced rate.
Another tax advantage is the potential to reduce or even eliminate capital gains tax. When your CRT is created, the trustee manages the gift until the trust remainder is given to your designated charity. He or she can invest trust assets, thus earning more money for the trust. Those increased earnings are considered capital gains. However, if you receive income from those gains, you will pay no capital gains tax because it is from a charitable trust.
There are several different CRT income plans you can choose from. A popular one is the annuity trust. Under this plan, you will receive a set amount of annual income from the trust. This amount will never change, regardless of whether the trust assets increase or decrease.
Alternatively, you could elect to receive what is called “standard unitrust” income. This means that you receive money based on the value of the trust assets. These fluctuating values can increase or decrease. Since trustees are allowed to increase the trust amount with investments, you could certainly benefit from any trust gains.
Experienced Trusts Attorney in Tampa
David Toback, Attorney at Law has been helping Tampa residents plan their estates for over 17 years. With his extensive experience in both trusts and tax law, David Toback can create a charitable remainder trust that will benefit both you and your favorite charity. Contact him today to schedule a consultation, and learn more about your options.