No matter what changes are made to estate tax law, charitable remainder trusts (CRTs) will remain viable. Such trusts are used mainly to avoid capital gains tax, not income tax. After you create a CRT, you can contribute appreciated assets such as real estate or securities.
The trustee will sell the donated assets to raise cash and then invest the proceeds. Subsequently, the CRT will pay income to certain individuals, as specified in the trust documents, and distribute the trust assets to specified charities after the income payments cease. Often, you can act as trustee of a CRT you create and also receive a lifetime income. In many cases, the income also will be paid to your spouse.
CRTs offer flexibility, in terms of setting the level of income you’ll receive, and control over the ultimate donation to the charitable beneficiaries. The catch? CRTs have initial and ongoing costs so you shouldn’t set up a CRT if you have less than $50,000 to donate.
