Charitable Remainder Trust
Special Applications of Charitable Remainder Trusts
The following are some special applications of the Charitable Remainder Trust.
Wealth Replacement Trust A popular charitable giving plan often proposed by Financial Planners, it combines a Charitable Remainder Trust with a life insurance trust to make a substantial charitable gift at a reduced cost to your heirs. It works by using the tax and income benefits from the Charitable Remainder Trust to purchase life insurance that ultimately replaces the Charitable Remainder Trust assets for the benefit of your heirs. By using an insurance trust, gift or estate tax is minimized or avoided, the cost of your gift to your heirs is reduced, and you have made a significant contribution.
Retirement Buildup Unitrust This trust is often used by younger donors in their late 40s and early 50s to enhance their retirement income stream. Through a combination of deferring income until retirement, tax-free compounding, and annual contributions of appreciated securities, a Charitable Remainder Unitrust can become a substantial part of a retirement plan.
Term of Years Annuity Trust An Annuity Trust can be used to provide a fixed payment stream for a set number of years. These trusts have been used to provide college tuition for grandchildren using appreciated assets. A rate can be set higher than would be allowed for lifetime payments. This type of trust has also been used to maximize the payment rate and charitable deduction when a terminal illness indicates you may not live to your normal life expectancy.
IRA Leftovers Testamentary Charitable Remainder Trust The amount of your IRA that remains after your death is an asset that may be subject to very heavy taxation. It can be subject to both estate tax and income tax payable by the ultimate recipient. Charitable Remainder Trusts have served a growing role as recipients of these distributions after death. The distribution is received without being reduced by the accrued income tax. Estate tax is offset by an estate tax deduction. The trust assets provide payments to heirs based on the full value of the distribution, after which the remainder passes to Covenant House.
Unitrust to Transfer a Family Business In a closely held (Chapter C) corporation held by older and younger generations of a family, the Unitrust can be used to effectively transfer ownership to the younger generation. The older generation contributes company stock to a Charitable Remainder Trust to provide themselves with retirement income, an income tax deduction, and capital gains tax relief. When the corporation purchases the older generation’s stock from the trust, the percentage ownership of the corporation by the younger generation is increased.
These special applications suggest the broad variety of goals that can be reached with a Charitable Remainder Trust, and illustrate how it may be tailored to meet your special needs while still making a tremendous contribution to Covenant House’s mission. Contact the Planned Giving Department for a personal consultation with no obligation.
HAVE QUESTIONS? For more information, please call Planned Giving toll free at 1-866-COV-HOUSE (That's 1-866-268-4687), or email plannedgiving@covenanthouse.org.
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