Investing with Faith / Jolinda Moore
Support your favorite charity with a Charitable Remainder Trust
Most people work hard for what they have. They put their talents to good use, set priorities and goals, and make the decisions—and the sacrifices—necessary to reach them. But as Catholics, we know that we are called to more than just diligence and discipline. We are also called to be generous with the resources we have: our time, talent, and yes, our treasure, too.
That’s because we know that “the earth is the Lord’s and the fulness thereof, the world and those who dwell therein” (Ps 24:1). Ultimately, everything we have comes from God—even the strength to work and earn what we have, and even the privilege of being able to share our blessings with others.
Planned giving is a good way to ensure that generosity is a part of our lives. But we may also want to find a balance between helping others and providing for our own legitimate needs as we grow older. A Charitable Remainder Trust (CRT) is a great way to do both.
With a CRT, you can support the charities you care about while still generating income for yourself or a designated beneficiary. Your CRT will operate for a period of time that you specify—up to 20 years, or the life of one or more of the non-charity beneficiaries. Payments to noncharitable beneficiaries can be made monthly, quarterly, semiannually or annually. Afterward, the remainder of the trust’s assets is donated to one or more charitable causes you name.
Another good reason to consider a CRT, though, is the potential tax benefits.
• A CRT is a tax-exempt and irrevocable trust that reduces income tax. Trust assets can include cash, stocks, real estate, business interests, and private company stock.
• Trustors who set up a CRT become eligible for a partial tax deduction. This deduction is based on the trust’s term and type, projected benefits to charities, and interest rates set by the IRS.
• Any assets irrevocably transferred to the trust are removed from the donor’s estate. Trust assets are therefore excluded from probate and not subject to estate taxes.
• A CRT converts assets into income that bypasses capital gains tax. If your CRT is funded with appreciated property, no capital gains tax is incurred when it is transferred to the trust, or when it is sold by the trustee. Instead, capital gains would be due only on a portion of each year’s distributions spread out over time.
Two types of CRTs allow some flexibility in structuring payments. A Charitable Remainder Annuity Trust (CRAT) distributes a fixed income to noncharitable beneficiaries—typically 5% but not more than 50% of total trust assets. A CRAT does not allow any additional contributions to be made.
A Charitable Remainder Unitrust (CRUT) distributes a fixed percentage of trust assets to beneficiaries. The annual distribution amount, therefore, will vary, but a CRUT allows for additional contributions to the trust to be made.
Securing a lifetime income and leaving a legacy of generosity aren’t necessarily opposing goals. Responsible Catholics can do both.
A Charitable Remainder Trust may be an appropriate way for you to bridge the needs you anticipate with the legacy of giving you want to leave behind.
If you are interested in learning more about Charitable Remainder Trusts or how a CRT may help you meet your personal giving and financial goals, the staff of the Catholic Community Foundation is here to help you. Please contact us at ccf@archindy.org or 317-236-1482.
(Jolinda Moore is executive director of the archdiocesan Office of Stewardship and Development and the Catholic Community Foundation [CCF]. Tax or legal information provided herein is not intended as tax or legal advice. Always consult with your legal, tax or financial advisors before implementing any gift plan. If you would like to learn more about including your parish in your estate plans, please contact us any time. We exist to exclusively serve you and your parish in planned giving.) †