Charitable Remainder Trusts - Have Your Cake and Eat It Too
If you are considering making a large donation to charity, but are unsure if you want to give up the use or benefit of the asset during your lifetime, a charitable remainder trust may the correct vehicle to implement your wishes. In its most basic form, a charitable remainder trust is created when you transfer an asset to charity, but retain the use of or income derived from the asset for your own lifetime or the lifetime of another. It permits the donor to ensure that a designated individual will have a steady stream of income for life, with the knowledge that ultimately the donation they have given will go to the charity of their wishes. A charitable remainder trust can be either inter vivos or created through a Will, and can be created so that the benefit is received by the person who created it, or by someone else such as a family member.
The main benefit of creating a charitable remainder trust is that even though you retain the use of or income derived from the property, the tax benefit of the transfer is immediate. The Canada Revenue Agency has stated that an immediate tax receipt is available to a person creating a charitable remainder trust provided that the transfer was done voluntarily, that the property vests in the recipient charity at the time of the transfer, the transfer is irrevocable, and the recipient charity will eventually receive full ownership and possession of the property. The ability to receive a tax receipt for donating money to charity, yet still retain the ability to use the property or derive income from it, may be a huge incentive to a person considering leaving a large amount of money to a charity to do so through the use of a charitable remainder trust.
The attractiveness of charitable remainder trusts as a potential revenue source for charities has lead many leading organizations in Canada to dedicate pages on their websites to advise potential donors of the availability of the charitable remainder trust as a potential donation tool. Organizations such as the Canadian Red Cross, Feed the Children Canada, the Alzheimer Society, and McGill University all have pages on their websites dedicated to encouraging potential donors to use charitable remainder trusts as a tool to implement their donation.
While the use of a charitable remainder trust may not be for everyone (the Cancer Society encourages only those leaving gifts of $100,000 and more to use it to offset the administrative costs associated with it), the ability for a person to receive the tax benefit of a charitable donation immediately, yet still be able to retain an interest in the property, may be a highly attractive option. If you are considering donating a large amount of money to charity either during your lifetime or in your will, perhaps a charitable remainder trust is the correct vehicle to implement your wishes.
Ian Hull - Click here for more information on Ian Hull.
