The Benefits of Creating a Charitable Remainder Trust in California

One of the key benefits of estate planning is designating whom you would like to receive your estate after you are gone. All of us have causes and nonprofits that we feel connected to and love to support. One way to support your favorite causes and charities is to create a charitable remainder trust. When you create a charitable remainder trust, you will be able to give to the charity or charities of your choice during your lifetime while protecting the assets you transfer into the trust. Upon your death, you can provide an annual sum for the charity of your choice. Or you can arrange for the charity to receive all of the remaining assets in the trust. We will explore the purposes and benefits of using charitable remainder trusts for estate planning below.

What is a Charitable Remainder Trust (CRT)?

As mentioned above, charitable remainder trusts are specialized trusts used by people who wish to give to philanthropic or charitable organizations after they pass away. These unique trusts allow people to pass on a legacy after they pass away while still having access to the funds they need during their lifetimes. The first step in creating a charitable remainder trust is to request the help of an experienced estate planning lawyer who will create your trust agreement and all of the supplemental documents you need. You will need to name the trust and appoint a trustee or trustees who will manage the trust for the beneficiary. The beneficiary is the nonprofit or charity organization that will receive money or assets from the trust.

Make sure you choose competent trustees as they will be managing the assets in the trust. Some of our clients prefer to appoint a professional fiduciary to act as a trustee. Trustees owe beneficiaries a fiduciary duty, and they are bound to follow the directions and instructions within the trust agreement. Your trustees have the legal authority to sell assets in the trust, pay taxes, and manage the trust for the charity you have chosen as the beneficiary. After the trust has been created, you will need to transfer ownership of your assets into the name of the trust.

Why Create a Charitable Remainder Trust?

Sometimes our clients ask us why they should go through creating a trust when they could simply give their assets to their favorite charity through their will or revocable living trust. Would it be easier to simply give the charity the money straight out after you pass away? There are several reasons why charitable remainder trusts are preferable to donating to a charity through your will. First, you may want to use one or more of your assets, such as land, or property to generate a lifetime of income rather than wait until after your death to use it.

Or, you may want to eliminate your estate taxes, or at the very least, reduce your taxes. You may want to decrease your current taxable income by transferring assets into the charitable remainder trust to help you pay less income tax. Perhaps you want to avoid capital gains tax that will come with selling an asset by transferring it into the charitable remainder trust. When you create a charitable remainder trust, you will likely experience several tax benefits. First, any contributions you make into the trust will provide you with significant annual income tax deductions.

Finally, you may want to create a charitable remainder trust so you have the assurance and peace of mind that your assets will fulfill your deeply held belief and objectives when you die. As long as you create the charitable remainder trust correctly with the help of your estate planning lawyer, there will not be any room for people to reject your donation. If you use your will or revocable trust to donate to the charity of your choice, you risk family members raising objections to the validity of your estate plan or challenging its terms.

Charities Appreciate Charitable Remainder Trusts

Many of our clients set up a charitable remainder trust in a way that allows the trust to continue giving to their favorite charities for decades. To do so, clients need to transfer enough assets that will gain interest over time. The trustee or trustees can place the assets and money market accounts or invest them elsewhere so that the trust continually gains interest. In these types of trusts, you can stipulate that the trust keeps the principal investment and pays part of the interest earned to the charity as the beneficiary.

Many charities appreciate being the beneficiary of charitable remainder trust because they know they will have a certain yearly income from the trust itself. Charities can better plan and fulfill their mission when they know that they will be receiving a certain amount every year from the charitable remainder trust. They can spend less time on fundraising and more time actively fulfilling their purpose.

Setting Up a Charitable Remainder Trust

If you are interested in setting up a charitable remainder trust, the best thing you can do is speak with an experienced estate planning lawyer. While charitable remainder trusts are unique, they are just like any other trust when it comes to setting them up. After you meet with your estate planning lawyer, they can get a better understanding of your goals over the long run. Would you like your trust to operate during your lifetime and then to pay out any remaining assets to your chosen charity? Or would you like your charitable remainder trust to earn interest and pay charities over a long period continually?

These are questions that the skilled lawyers at the Law Offices of Daniel Hunt can help you answer. We have a proven track record of successfully helping our clients establish charitable remainder trusts to promote their favorite causes. Contact us as soon as possible to schedule an initial appointment and learn how we can help you achieve your estate planning goals.

Law Offices of Daniel A. Hunt

The Law Offices of Daniel A. Hunt is a California law firm specializing in Estate Planning; Trust Administration & Litigation; Probate; and Conservatorships. We've helped over 10,000 clients find peace of mind. We serve clients throughout the greater Sacramento region and the state of California.