When you create a charitable remainder trust (CRT), you can specify a stream of payments to a beneficiary or beneficiaries you name. You might, for example, name yourself and your spouse as the individual beneficiaries.
The trust can be instructed to make payments as long as either is alive so the cash might flow for decades. After the individual beneficiaries no longer are receiving cash flow, the assets left in the trust (the “remainder”) go to a charity or charities you’ve named.
With such a strategy, you stand to gain multiple benefits:
Tax deduction: The present value of your future charitable donation will be calculated. You’ll get an immediate tax deduction, even though the charitable gift might not occur until many years in the future.
Cash flow. You have considerable flexibility as to the payment stream you can get from a CRT. You might get a fixed annual payout or a fixed percentage of trust assets each year.
Tax deferral. If you donate appreciated assets, you can spread the capital gains tax over many years, as payments are received.
Philanthropic fulfillment. Even though the charity won’t receive a benefit until sometime in the future, you will get some recognition now for your donation.
