What is a Charitable Remainder Trust, and How Does it Work?

Charitable remainder trusts (CRTs) are irrevocable, and they have the added benefit of providing potential income for the donor or for a beneficiary named by that donor, along with providing money for a charity that the donor feels should receive assistance or monetary help. The donor can also choose more than one beneficiary to provide income for, and more than one charity to leave money to, depending on that donor’s preferences and goals. These options help with estate planning and charitable giving, but also with an income stream and retirement funds.

Who Receives the Money?

The donor can get an income stream from a CRT, and the remainder of the money left over when the donor passes away will then be given to the designated charity or charities. If the donor does not need the income stream, it can be designated to go to another beneficiary instead. That way, there is an immediate tax deduction for charitable giving, an income stream, and the opportunity for a charity to receive a substantial donation in the future. While the CRT is irrevocable, it does provide the donor with a higher measure of control than some other investment/donation vehicles.

A Big Part of Estate Planning

For a number of people, a CRT is a large part of their estate plan. This occurs mostly because of the flexibility and options allowed, but also because the deduction can be taken right away and there is still an income stream. Some people avoid giving large sums or setting up a trust because they may need that money in the future, but with a CRT and the income stream potential, donors will have more options to explore.