Charitable Remainder Trusts
Many of us give to charities by handing out pocket change at the door or by giving monthly gifts by automatic deposit. Some may leave bequests to their favourite charities in their Wills. For those who have a little more to give during their lifetime and beyond, there are additional ways to provide for planned giving to charitable organizations.
For example, the Charitable Remainder Trust (“CRT”) allows the capital of a gift to be given to a charity while the income earned is retained by the donor or some other person for their lifetime. The CRT can be an inter vivos trust given during the donor's lifetime, or testamentary trust that comes into effect upon the donor's death.
With a CRT, the donor establishes an irrevocable gift to a charity in return for a discounted tax receipt. The cash flow from income generated by the gift is fully taxable. The charity receives an irrevocable gift and upon the termination of the trust, will receive the remainder.
There are many advantages to a inter vivos CRT including:
-
Lifetime income to the donor.
-
An immediate tax receipt.
-
Avoidance of probate, saving probate fees and allowing the existence of the trust to remain private (unlike a Will, which is a public document).
The advantages of a testamentary CRT are:
-
Lifetime income to a loved one.
-
A tax receipt to the estate.
-
The trust is revocable and takes effect on death of the donor/testator.
The most important advantage of a CRT for the charity itself, especially for those created during the lifetime of the donor, is that it allows the charity to project the resources available to it and better plan for achieving its charitable objectives.
Sharon Davis - Click here for more information on Sharon Davis.
