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Charitable Remainder/Lead Trust

Charitable Remainder Trusts (CRT)

CRTs are considered a “split- interest” gifting strategy in that you and the charity share the benefits of the instrument at different points of time.  HCF does not originate CRTs but as you will see below, a named fund at HCF can substantially enhance the capability of this popular charitable planning tool

Through a charitable remainder trust, you place assets in trust and specify income from the trust will be paid to a beneficiary (usually you and your spouse or children) for a period of years or for the life of the beneficiary(ies). At the same time, you specify that the remaining principal, at the end of the trust term, will go to charity.  By naming HCF as remainder beneficiary, the trust will be terminated at your death and the funds your trust at that time will be deposited into your named Fund at HCF. This will become will become your enduring legacy.

The charitable remainder trust is an ideal vehicle for the client who:

  • has accumulated appreciated but low-yielding assets
  • wants to increase current income without incurring capital gains taxes
  • wants to reduce estate taxes and maximize the estate passed onto heirs
  • wants to make a significant future charitable gift

Charitable remainder trusts can be created during the donor’s lifetime or by bequest.

Interesting strategies involving CRT’s:

Your professional advisor can help you optimize the benefits of the CRT by drawing on the unique benefits the named fund at HCF and the CRT offer.  The CRT provides income during your lifetime, but a reduced immediate income tax deduction, whereas the named fund at HCF pays no income but offers the highest income tax benefits available.  By blending these two strategies, you can tailor your financial/charitable planning to your needs

At a point of time you may want to make grants the charity while you and your spouse are living.  By contributing your income distributions to your named fund at HCF, you will receive and offsetting income tax deduction and have charitable dollars for grantmaking.

At another point of time, you may want to get involved in major grantmaking from you named fund at HCF.  You could assign your interest in the CRT to your named fund at HCF.  In this strategy you will collapse your CRT into your named funds at HCF. At that point your charitable assets are in your named fund at HCF and you can engage your family in philanthropy while you are living.

Charitable Lead Trusts (CLT)

HCF does not originate CRTs but as you will see below, a named fund at HCF can substantially enhance the capability of this popular charitable planning tool as a way to reduce gift, estate, and generation-skipping taxes in passing assets to heirs.

A lead trust is essentially the opposite of a remainder trust.  That is, you place assets in trust and specify that the income of the trust will be paid each year to charity for a period of years.  The charity can be your named fund at HCF.   At the end of the trust term, the principal of the trust passes intact back to an individual beneficiary with substantial tax benefits.

CLTs are appropriate if:

  • You can  afford to live without the income for a period of time from a portion of your assets
  • You have  accumulated significant assets and wishes to pass a portion of them to your heirs
  • You are concerned about estate taxes, gift taxes or generation-skipping taxes in transferring property to heirs
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