People who are getting serious about preparing their assets for eventual distribution to their loved ones upon their passing often times sit back and contemplate their overall legacies. You can go through a period of very profound soul-searching during the latter stages of your life, and you may find that you would like to punctuate your legacy with some charitable giving. There are a number of estate planning vehicles that enable people to satisfy their philanthropic urges, and many times they provide tax advantages as well. One such vehicle is the CRUT or charitable remainder unitrust.
With these vehicles you as the grantor fund the trust and name both a charitable and a non-charitable beneficiary. These trusts provide ongoing annuity payments to the non-charitable beneficiary for the duration of the trust or until the beneficiary passes away, so the grantor usually acts as the beneficiary. These annual annuity payments must equal at least 5% of the value of the trust and no more than 50%. At the end of the trust term or upon the death of the grantor the non-charitable beneficiary assumes ownership of the remainder of the trust, and this amount must equal at least 10% of its original value.
As for the tax advantages, right off the bat when you fund the trust you are removing those assets from your estate and they are no longer going to be there to contribute to your estate tax exposure. You also gain a charitable deduction that is calculated based on the valuation of the remainder interest. Additionally, if you were to fund the trust with securities that had appreciated you could have the trust sell them in an effort to spread out your capital gains tax exposure over the term of the trust rather than being responsible for paying it all in one lump sum.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.