If you are considering donating to charity but also want to make sure that your money takes care of you, then a charitable remainder trust could be the perfect option for you. In Maryland, this type of trust involves giving away assets to charity while taking care of your own financial needs and enjoying tax benefits as well. Read on to learn more about this popular strategy.
What is a charitable remainder trust?
A charitable remainder trust also called a CRT or grantor-retained annuity trust is an irrevocable split-interest vehicle that allows you to transfer property to a trust, retain the right to receive income from the transferred assets for a period of time or your lifetime, and have all or part of the remainder interest in those assets go to charity.
How do you set it up?
Setting up a charitable remainder trust is a fairly simple estate planning process. You transfer assets, such as cash or stock, to this special kind of trust and retain the right to receive an annual payout for a set term. For example, you might receive income from the assets in the CRT for 25 years or for the rest of your life.
What about taxes?
The main purpose of a CRT is to provide you with an immediate income tax deduction. When you first donate assets to the trust, you get an immediate income tax deduction that is equal to the present value of your interest in these assets based on IRS tables. You can use this charitable deduction for any income or estate tax liability you have at the time.
The amount of the charitable deduction varies depending on several factors, including how long you are able to keep receiving payments from the trust and your age at that time. In other words, the older you are when creating the CRT, the bigger your tax deduction will be.
Many people have successfully used this strategy to make a gift that benefits themselves and their loved ones while doing good in the world through charitable giving. The best part is that it’s easy to include in your estate planning process.