The Charitable Remainder Trust Retirement Income and a Charitable Deduction

A charitable remainder trust is a good way for a person or a couple to contribute to their favorite charity while guaranteeing themselves income for life. In general, these trusts can be set up by anyone, and in many cases function as a any other trust, but the remainder of the trust funds are given to a charity after the original recipients have died.

To invest in a charitable remainder trust, the first step is to decide what funds, accounts, and assets will be placed in the trust. Anything placed in this type of trust can be used and/or spent by the first beneficiaries of the trust during their lifetimes. Upon the death of all of the first beneficiaries of the trust however, all remaining assets are passed along to the charity that is named as the secondary beneficiary.

It is important for people deciding on which assets to place in the trust to remember that the charity is the only recipient of these assets. If an individual or couple wants to leave assets to other people or organizations, these assets will need to be placed in a separate trust. 

All assets that are placed within a charitable remainder trust can be accessed, used, and sold by the primary beneficiaries throughout the lives of the primary beneficiaries. For example, a house placed in a charitable remainder trust can be lived in by the primary beneficiaries. The primary beneficiaries are also able to make improvements, take out a primary and secondary mortgage, and even sell the home.  After the death of the primary beneficiaries, the charity will inherit the home and can use the property as they see fit unless restrictions are spelled out in a will.

There are several good reasons for choosing a charitable remainder trust instead of simply leaving assets to a charity in a will. By placing assets in a trust, the assets will bypass the probate process. This will allow the transfer of these properties to occur quickly and without government interference. Assets in the trust are also not subject to taxes.

Placing assets within a trust also provides some limited protection from claims by people who would want to take the assets. Placing assets in a trust sends a clear message to a probate judge about what the benefactors’ intentions regarding their property were.

Of course, the main reason most people have for investing in a charitable remainder trust is that it gives them the opportunity to make a large donation to their favorite charity. For individuals or families who need their assets while they are alive, a charitable remainder trust allows them to use the assets, but still be assured that their favorite non-profit organization will benefit from those assets upon their death.