The previous two articles discussed how to make charitable gifts at death, either through a Last Will and Testament or through a beneficiary designation on a life insurance policy, IRA, or 401(k) account. In this article, let’s talk a little about trusts.
Simply speaking, a “trust” is a financial arrangement in which the legal ownership of assets is transferred to a “Trustee” who holds the assets for the benefit of another person, known as the “income beneficiary”. After a stated period of time, the trust ends, or terminates. The assets are then paid to the ultimate beneficiary, known as the “remainderman”.
In the world of planned giving, one of the most popular techniques is use of a Charitable Remainder Trust (CRT). It is so named because, at the end of the trust, the assets pass outright to a charity. Generally, you transfer legal title to the assets which are to be held in the CRT to the Trustee. You then designate the current income beneficiary, who will receive a guaranteed cash flow, typically for the balance of his lifetime. When the income beneficiary dies, the trust terminates and the balance on hand is paid outright to your designated charity, for example, Assumption Church.
A CRT can be created in either of two ways: by your Last Will and Testament, in which case it doesn’t take effect until you die, or during your lifetime, by execution of a contract, known as a trust agreement, between you and the person or banking corporation who will serve as the Trustee. In the latter case, you yourself could then be the current income beneficiary.
There are several advantages to a CRT, especially if it takes effect during your lifetime and is funded with appreciated stock: immediate income tax deduction; increased cash flow; deferral or avoidance of capital gains taxes; estate tax deduction; and, last but not least, philanthropic accomplishment.
Caution: CRT’s are very technical and you need the advice of an expert.
Questions? Call Dan Overbeck, Parishioner and retired Finance Council member, at 223-8963.