With charitable donations, the more you give, the more you get — in terms of tax benefits, that is. One particularly attractive way to support your favourite cause(s) is with a Charitable Remainder Trust (CRT).
These flexible, powerful tools can deliver generous tax benefits today, provide a lifelong income for you and your surviving spouse (or other loved one), and leave a very generous legacy to your alma mater or favourite charity at death.
How it works
Briefly, a CRT is a trust into which you place an income-producing asset. There is tremendous latitude with respect to the assets that can be used to fund a CRT. They include cash, securities, life insurance, annuities, and even real estate. You then name your school or other registered charity as the trust’s irrevocable beneficiary.
You retain control of the asset for as long as you live, which means that you make the decisions about it and you receive all of the income it produces for as long as you live. At death (or after the deaths of you and your spouse or other designate), the trust assets and all of its residual value are transferred to your chosen charity.
From a tax perspective, you are considered to have donated the asset at the time the trust is established. You will receive a tax credit for that year based on the fair market value of the asset.
Why it’s so valuable
One of the key benefits of a CRT is that you retain control of its assets. In the case of a family cottage, for example, you would enjoy lifetime access to the property and a sizeable tax credit for donating it. The CRT could also be a way to avoid the prickly subject of who might otherwise inherit the cottage and pay the tax bill on its deemed disposition.
Another benefit is that assets assigned to a CRT do not have to pass through probate and so will not leave your estate with any probate or administration fees.
Seek advice first
As you would expect, careful planning when establishing the trust will help secure the most benefits now and for your beneficiary down the road.
These types of gifts are much sought after by charities, and many have full-time staff to answer your questions and administer your gift. It may even be possible to establish an endowment fund or program that will carry your name forever.
CRTs are just one of many ways to support the causes that are important to you. If philanthropy is high on your list of priorities, we can help you explore your options and implement an effective charitable giving strategy as part of your overall investment plan.
Larry Kleinmintz, R.H.U., T.O.T., M.D.R.T.
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