A charitable remainder trust (CRT) is a great option for individuals seeking to make a generous gift to ministry, but also looking to create an ongoing source of income for themselves or a beneficiary.
In addition to providing a source of income, a charitable remainder trust is also a powerful way to convert real estate, stock or other appreciated assets into significant tax savings. CRTs typically provide an income tax deduction if you fund the trust while you’re alive. If you use appreciated assets to fund the trust, you may also avoid capital gains tax on the sale of those assets.
For donors who prefer to fund the trust after they die, there’s the option to create a “pour over” trust. Pour over trusts are funded with some or all the assets remaining in your estate, after you die.
Regardless of if it’s funded while you’re alive or after you’ve died, when the terms of your trust expire, whatever remains in the trust will be gifted to the ministry you designated when you created the trust.
Essentially, there are three components of a charitable remainder trust:
First, you donate cash, stocks, real estate or other assets into an irrevocable trust. This can be done while you’re alive, or be carried out after you’ve died. Similar to other charitable donations, if funded while you’re alive, this may qualify you for a partial tax deduction that year. If you fund the trust with appreciated assets, the Foundation will sell the assets at market value, without incurring the capital gains tax you’d pay if you sold them yourself. That means the full market value of your assets can be invested into your trust.
Second, you determine who will receive income from the trust. The beneficiary can be yourself (if the trust is funded while you’re alive), an heir, or multiple beneficiaries. The amount of income is determined as a percentage of the trust’s value and can last for the lifetime of the beneficiaries, or for a specified term of years. CRT income payments are typically taxable.
Finally, after the specified term of years, or after the death of all beneficiaries, the remaining value of the charitable remainder trust is distributed to the ministry or ministries you chose when you established the trust.
There are multiple types of charitable remainder trusts. Two of the most common are:
Charitable remainder annuity trusts (CRATs) pay a fixed dollar amount each year (much like a basic annuity). You can’t make additional contributions to a CRAT after it’s established.
Charitable remainder unitrusts (CRUTs) pay an amount equal to a fixed percentage of the trust’s value at the beginning of each year. CRUTs do allow donors to make additional contributions to the trust after it’s established.
Let the LCMS Foundation help you determine if a charitable remainder trust makes sense for you. Our gift planning counselors can help you determine how to make the greatest impact with the gifts God has provided.
To have a gift planning counselor contact you by email or phone, please fill out the form below.
2 Corinthians 9:6
Our straightforward process begins with discussing what’s important to you. Then, with our knowledge and expertise, we'll help you establish goals, take full advantage of tax benefits, and thoughtfully provide for and your family and your faith, even after you've left this Earth.
Many wonder if they have “enough” to create a gift plan. The answer is always yes. All people possess God’s gifts, and even the humblest gifts can make a positive impact. And regardless of the gifts you wish to share, our counselors will work with you, at no charge. Learn more in our FAQ section..
Just as everyone has different goals and needs, we offer a variety of different options to structure your gift plan. Each option has its respective strengths and variables, and each can be of benefit to someone if applied thoughtfully, and with guidance. Learn more about the most common gift plan options by clicking below.
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