What is a charitable remainder trust?
A charitable remainder trust (CRT) is a type of trust set up in the state of Washington that allow people to donate money to charities and receive tax benefits in return. The trust invests the money and pays a percentage of the trust’s income to the donor and/or their beneficiary during the donor’s lifetime. When the donor passes away, the remaining assets will pass on to the designated charity of the donor’s choosing. A CRT can be structured as an annuity trust or unitrust. An annuity trust pays out a fixed amount of money each year to the donor (or their beneficiary) while the unitrust pays an amount that fluctuates each year based on the trust’s assets. A charitable remainder trust can provide significant tax benefits for the donor including deducting the amount of the donation from their taxable income and/or avoiding taxation of the capital gain when disposing of the assets. An added benefit is that the donor is able to remain involved in the trust’s management. These trusts are sometimes used by people who are looking to reduce their estate taxes or to pass on assets to their heirs in a more tax-efficient way. Additionally, people who want to support a charity of their choice can use a charitable remainder trust to make the donation more attractive to the charity.
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