Charitable Remainder Trusts

How It Works

A charitable remainder trust is a deferred giving arrangement under which you may transfer property, cash, securities or real estate, to a trustee. You, and/or other beneficiaries, retain the right to the income from the trust either for life or for a specified number of years. The charity receives whatever remains in the trust after the specified term, or after the death of the last beneficiary, whichever has been stipulated in the trust document. Donors who establish a charitable remainder trust receive a charitable donation receipt for the present value of the future gift (the "charitable remainder") which the charity will receive when the trust terminates. That value is calculated based on actuarial tables, taking into account the value of the property transferred to the trust, interest rates, the age of each beneficiary, or the term of the trust if it is for a specific number of years.

What to Do

There are two types of charitable remainder trusts: irrevocable, which means you can't change your mind, and revocable, which means you can revoke the trust during your lifetime. If you choose an irrevocable charitable remainder trust, you receive a tax receipt now for the present value of the remainder interest. If you opt for a revocable trust, your estate will receive the tax receipt when the assets are delivered to the charity.

If you are thinking about establishing a trust, you should review the tax implications with your estate planner or accountant. Drafting a trust document can be complicated, and requires the assistance of a lawyer to tailor the trust to your own circumstances.

Benefits to You

  • You could receive an immediate tax receipt for the present value of residual interest.
  • You have the benefit of income from your assets throughout your lifetime.
  • Your trust is professionally managed.
  • You can avoid tax on a portion of, and possibly all, capital gain.