Could you please explain the “charitable remainder
trust” and the benefits as it relates to estate
Federal tax laws make it possible to contribute
sizable gifts without the loss of one’s income. It
is also possible to make large gifts to charity and
actually increase one’s lifetime spendable income in
the process. This can all be made possible by
creating a charitable remainder trust.
The two types of charitable remainder
trusts are the annuity trust and the
unitrust. The annuity trust is one from which a
specified sum is paid to the non-charitable
beneficiary each year. With the unitrust, the net
market value of its assets is determined annually.
A prescribed percentage of this value is paid to the
beneficiary each year, thus the payments may vary
from year to year depending upon the trust’s current
Under these trusts, the donor receives
an immediate tax deduction for transferring assets
to a trust that meets the requirements of a charity
under the Internal Revenue Code. A special
provision should be included in the trust, allowing
one to change the charitable beneficiary in case the
charity receiving the gift ever loses its “charity
With the abundance of non-profit
organizations emerging in the State of Florida, it
becomes easy to do some estate planning which gives
you favorable tax breaks and, at the same time,
helps your favorite charity.
An example of how the charitable
remainder trust could work is as follows: Bob and
Mary, age 75, owned stock in ABC Company, which
stock accelerated in value to $200,000.00. They
decided to place this stock in a charitable
remainder trust and reserved for themselves a
$15,000.00 annuity for the rest of their lives.
They gave their assets upon death to their church,
upon the death of the last survivor, Bob or Mary.
Because of their gift, they avoided capital gains
tax on the stock, increased their present level of
income, and gained a huge tax deduction on their
income for several years. They have a guaranteed
source of income and have added more stability to
their lives. Because of their religious beliefs,
they are very content in knowing that their
contribution will go for a needed purpose.