If you’ve always wanted to do some good to the world by giving part of your resources to charitable causes and keeping enough to take care of yourself and loved ones in New York, you may want to consider a charitable remainder trust. This trust lets you kill three birds with one stone by allowing you to indulge your philanthropic causes and provide for your people while enjoying some tax benefits during and after your lifetime.
Understanding how charitable remainder trust works
A charitable remainder trust is an irrevocable trust in which a person or entity transfers assets to a trust for the benefit of charity and themselves. The donor will receive income from the trust, either as regular payments or a lump sum payment at the end of their lifetime. At the end of the term, when all designated beneficiaries have passed away, whatever remains in the trust goes to charitable causes.
Reasons why New Yorkers prefer CRTs
Charitable giving and tax planning can provide numerous benefits to both donors and their beneficiaries; for example, the IRS allows taxpayers to take an income tax deduction for the present value of the remainder interest in their CRT, often resulting in a larger deduction than for cash donations. In addition, donors may be eligible for estate tax and gift tax deductions, depending on how they structure their trust. Other advantages of establishing a charitable remainder trust include avoiding capital gains taxes when transferring assets to the trust, protecting assets from creditors, providing long-term income to beneficiaries; and potentially increasing the size of inheritance left to heirs.
Remember that a charitable remainder trust is an irrevocable transfer of assets, meaning you cannot change or revoke it once you’ve created it. Additionally, donors must designate a trustee and beneficiaries, typically their spouse or children, who will receive income payments during the life of the trust.