A Charitable Remainder Trust (CRT) is an irrevocable trust that is set up by an individual and names a non-profit charity as beneficiary upon a person’s death. The creator of the CRT may act as trustee. This allows the creator to maintain control of the CRT and receive set payment from the CRT until death.

The Internal Revenue Service (IRS) gives the trust creator several tax benefits. First, it forgives any capital gains built into the assets. The trust creator is also given an immediate charitable tax deduction. This deduction is based on the estimated amount to be donated in the future. This amount must be 10% or more of the fair market value of the net assets placed initially in the trust. The trustee can invest the trust assets in a tax-free environment similar to an Individual Retirement Account (IRA). If the creator serves as trustee, he may maintain control of the trust investments. Estate tax is eliminated on the assets held in trust.

There are two main types of CRTs: the Charitable Remainder Annuity Trust (CRAT) and the Charitable Remainder Unitrust (CRUT). The CRAT pays a fixed payment every year to the creator. The CRUT pays a set percentage of the trust assets as valued each year. Each type requires that the creator is paid between 5% and 50% of the CRT. This percentage is set upon the creation of the trust.

A CRT is an ideal planning tool for those who own appreciated assets and who are charitably inclined. It is complex planning tool and requires the assistance of a qualified estate planner.

The CRT is irrevocable but changes are allowed to designated beneficiaries. Additional charities can be added, and the percentage of trust can be changed.

For more information on CRTs, visit the Internal Revenue Services (IRS) Web site.