Tuesday, May 16, 2023
Charitable Remainder Trusts: A Favorable Tax Strategy that Can be Aided by Higher Interest Rates
A Charitable Remainder Trust (CRT) is a powerful way to mitigate tax burdens while also giving back to charity and an attractive tool for an estate planning tool.
A CRT is an irrevocable trust that benefits both the testator and a charity and can be an adequate income and estate tax planning tool. With a CRT, a gift can be made to a trust and retain an annual payment amount from the trust for either a lifetime or a period of years, and at the end of the trust term, the balance of the trust goes to a charity of the testator’s choice.
Assets that appreciate in value are often best suited for a CRT, as they are subject to significant capital gains taxes once they are sold. By gifting these assets to a CRT, one can avoid paying capital gains taxes upon the sale. However, income tax payments will be applicable from payments received from the trust.
For more information on CRTs, see David Oh “Charitable Remainder Trusts: A Favorable Tax Strategy that Can be Aided by Higher Interest Rates” Fiduciary Trust International, May 4, 2023.
Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.