Charitable Remainder Trusts

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Charitable Remainder Trusts

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Charitable Remainder Trusts

A charitable remainder trust is established with irrevocable contributions of cash, marketable securities, or other property. The parties to the trust are the Donor, the Trustee, the Beneficiaries (also called the Recipients), and the Charitable Remainder Beneficiaries. The Donor contributes assets to the trust. The assets are typically sold and the proceeds reinvested by the Trustee. The Trustee makes lifetime payments to the Beneficiaries according to the terms of the trust. At the termination of the lifetime interests the Trustee distributes the remaining trust assets to the Charitable Remainder Beneficiaries.

When establishing a charitable remainder trust the Donor names the parties to the trust and specifies the terms. The following brief description summarizes the specifications of a CRT:

Trustee:
You can be the trustee as well as the donor and a beneficiary of your charitable remainder trust. As trustee you have control over administration of the trust and investment of the trust assets. Life Fund Services acts as your agent to handle the details of trust administration. Your financial advisor works with you to select appropriate investments for your trust. You can name successor trustees or alternate trustees and you can retain the right to change your designation of trustee at any time.
Beneficiaries:
You can name yourself, a spouse, and/or others as beneficiaries of your charitable remainder trust. You can name primary beneficiaries who will immediately share the lifetime income, and contingent beneficiaries who will receive payments only after the death of all primary beneficiaries. Once the trust is established the designation of beneficiaries may not be changed. All beneficiaries must be alive and named when the trust is established.
Lifetime Income Payments:
Lifetime income payments to the beneficiaries may be either
  • A fixed dollar amount
  • A variable amount dependent on the annual value of the trust assets
  • A variable amount equal to the income of the trust, but capped at an amount dependent on the annual value of the trust assets
  • You select the size of the payments - the dollar amount of fixed payments or the percent of value for variable payments. Once the trust is established the payment amount or percentage may not be changed. Variable payments allow the beneficiaries to share in the growth of trust assets and are usually preferred. Also, with a variable payment trust, additional contributions can be made after the trust is established. Fixed payments require a separate trust for each contribution.
    Payment Term:
    Ordinarily, payments from a charitable remainder trust are made for the lives of the selected beneficiaries. As an alternative you can specify that payments be made for a fixed term of up to 20 years. The fixed term option can be a useful way to fund educational expenses for a child or grandchild. Once the trust is established the payment term may not be changed.
    Charitable Remainder Beneficiaries:
    At the death of the beneficiaries or the end of the fixed term, the remaining assets in your charitable remainder trust will go the the charitable organizations of your choice. You can specify that you want your donation held as an endowment, with only the income being used by the organization. You can also specify the charitable purpose you want your donation used for. You can retain the right to change your designation of charitable remainder bveneficiaries at any time.

    For a charitable organization, charitable remainder trusts are a source of long term fund raising. The lifetime benefits of a CRT may allow a donor to contribute substantial sums that might not otherwise have been donated. In many cases, funds from a charitable remainder trust will be left to an organization's endowment fund, or to a private foundation that will provide charitable support in perpetuity.


    For further information write or call:
    Life Fund Services L.L.C.
    7 Fairfield Court
    Danbury, CT 06811
    (203) 792-3057

    or e-mail: wise@usa.net

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