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Charitable Remainder Trust

A Charitable Remainder Trust (CRT) is a way for you to make a significant charitable gift while enjoying tax savings and additional income. After irrevocably transferring money, securities or other property to a trust, you (or other beneficiaries) then receive payments during your lifetime. Naming the Community Foundation as the beneficiary of your CRT is an easy way to create your lasting charitable legacy through a permanent endowment fund that will support your personal charitable passions. This future fund is documented separately from the trust and can be changed over time, at no charge, without affecting the legal trust instrument in any way. The Community Foundation may serve as trustee, as long as 100% of the trust remainder will establish an endowment fund at the Foundation and the trust assets are at least $100,000.

Flowchart: Donor funds a Charitable Remainder Trust (CRT). The donor receives payouts from the trust and the Community Foundation of Louisville receives the remainder at the end of the trust term to fund the charitable purpose the donor intended.

Benefits of a charitable remainder unitrust

  • You can place appreciated assets in the trust (such as stock or real estate) and defer all capital gains tax on the transfer of the assets. The trust investments can be carefully selected to minimize production of ordinary income and maximize recognized capital gain in the income payments, subject to 4-tier accounting rules.
  • You will receive a charitable income tax deduction based on the number and age(s) of beneficiaries, the payout percentage, and the fair market value of the assets used to fund the trust. This deduction can be taken in the year the CRT is created, and any unused deduction can be carried forward for the next five years. If the trust is funded with appreciated assets, you may deduct up to 30% of your adjusted gross income annually.
  • You can greatly reduce your estate tax on assets in the charitable trust or eliminate estate taxes entirely if you and your spouse are the only beneficiaries. The amount of your estate exempt from taxes will vary under current tax law, depending on the year of your death.
  • A CRT provides a hedge against inflation, and additional contributions can be made to a unitrust.
  • A Wealth Replacement Trust can be funded with life insurance to maintain your heirs' future inheritance. The income generated by the CRT can be used to cover the premium payments of the life insurance.

Payments to Beneficiaries

The payments from a CRT may be made for the life or lives of the income beneficiaries or for a fixed period of years, not to exceed 20 years. Payments will vary based on the type of trust that is established:

  • A Charitable Remainder Unitrust payment is based on a fixed percentage (minimum of 5%) of the trust and is calculated each year based on the value of the trust assets. Consequently, your payments may vary depending on the performance of the trust investments. You can make additions to a charitable remainder unitrust as often as you like.
  • A Charitable Remainder Annuity Trust payment is calculated at the time the trust is created. These payments do not change over time, regardless of trust performance. You cannot add to a charitable remainder annuity trust once it is established.

Contact us

If you have any questions about a Charitable Remainder Trust, please contact us. We would be happy to assist you and answer any questions you might have.

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