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Could A Charitable Remainder Trust Meet Your Philanthropic And Retirement Income Needs?

Could A Charitable Remainder Trust Meet Your Philanthropic And Retirement Income Needs?

May 13, 2020

There’s so much need in this world, sometimes it can be hard to balance taking care of yourself and your desire to help make the world a better place. You want to give of the wealth you’ve accumulated but you want to be wise about it to ensure that you won’t outlive your money and end up needing charity yourself. One solution to this dilemma is a charitable remainder trust. 

Benefits Of A Charitable Remainder Trust

A charitable remainder trust allows you to convert an appreciated asset into lifetime income. With the trust, you technically donate the asset to charity before it is sold, which allows you certain tax benefits including a charitable deduction. You will receive more income over your lifetime by using a charitable remainder trust than if you had sold the asset yourself, and you even gain creditor protection for it. It also provides other important tax benefits and, best of all, you get to contribute to charitable causes that are near and dear to your heart. 

How Charitable Remainder Trusts Work

How can a simple trust do all of those great things? This is how: The first step is to set an irrevocable trust where you are the income beneficiary and when you pass away, the remainder goes to the charity or charities of your choice. 

Next, you transfer assets to the trust. Ideal assets for this arrangement are those that have greatly appreciated in value since you purchased them. The best are publicly traded securities, real estate, and stock in some closely held companies. S-corporation stock and mortgaged real estate do not qualify. Because the beneficiary of the trust is a charity and the trust is irrevocable, you get an immediate charitable deduction for the asset on your income taxes. 

Once you have transferred the asset, the trustee will sell it. They do not have to pay any capital gains tax and can reinvest the proceeds in an income-producing asset. For the rest of your life, that income is paid to you and your charity gets the rest when you pass away.

Why Charitable Remainder Trusts Are Used

Why do you need a trust to do this? Why can’t you simply sell the asset yourself, keep the income, and pass the proceeds to a charity in your will? You can, but it will cost you. Utilizing a charitable remainder trust provides important tax benefits which can save you money. Also, if you hold the investment, it is subject to your creditors. If it is held in trust, your creditors cannot access it. 

How I Can Help

This is just a brief overview of charitable remainder trusts, but they can be tailored to specific situations. You can choose to receive a fixed income or one that matches the investment’s performance. You can choose the beneficiaries of the trust, whether it is yourself, your spouse, children, or grandchildren. You can also put off collecting the income if it is not needed right away. 

As you can see, if you are charitably inclined, a charitable remainder trust may be a wise addition to your financial and estate plan. If you want to learn more about them and how they may help you meet your specific financial goals, we at Grace Wealth Management Group can help! Call me at (949) 631-3840 x2, email, or schedule here for a free consultation.

About Jim Peters

Jim Peters is an independent financial advisor and the founder of Grace Wealth Management Group, Inc., a full-service financial firm committed to helping people pursue their financial goals. With more than 24 years of experience in the industry, Jim combines his extensive knowledge with his genuine interest in helping people pursue financial independence. Beyond his experience, he is certified as both a Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®), meaning he has advanced training and knowledge in financial planning and insurance. Based in Irvine, California, Jim specializes in working with individuals, families, and businesses throughout Orange County. To learn more, connect with Jim on LinkedIn or visit