UNDERSTANDING CHARITABLE REMAINDER TRUSTS

When embarking on estate planning, Florida residents have many choices to make and factors to consider. In addition to providing for one’s heirs, leaving assets to a charitable organization is a common thing for people to outline in a trust. There are multiple vehicles that allow for this and charitable remainder trusts are one of those options.

According to Investopedia, these trusts are irrevocable and tax exempt. They offer the creator of the trust, who is essentially the donor, the option of receiving income at the same time. Bankrate notes that charitable remainder trusts, a form of split-interests trusts, were first established by Congress in 1969. At least 10 percent of the original trust value must ultimately be left to a designated charity. Additionally, annuity payments to the trust donor can last for the remainder of the donor’s life.

There are two types of charitable remainder trusts. The first is a charitable remainder annuity trust or CRAT. With this trust, the amount of income a donor receives each year is fixed. This can offer the ability to plan for a certain level of income. The second type is a charitable remainder unitrust or CRUT. With these trusts, the annuity income will fluctuate based upon market conditions. The risk here is, of course, tremendous income loss in the event of a major market crash or negative change.

Before developing a charitable remainder trust, people should carefully weigh their options. They offer many benefits but the lack of ability to alter these trusts along with potential income fluctuation also means they are not for everyone.

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Written by Luis E. Barreto

Luis E. Barreto

Luis is a probate and guardianship litigator with over 23 years of experience in the field. Determination of heirs, will contests, breaches of fiduciary duty, removal of personal representatives, guardians and trustees are just some of the types of litigation he addresses. In addition, he administers non-contested estates and guardianships.