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How Can I Benefit from a Charitable Remainder Trust?Sometimes it takes tough
economic times and natural disasters to unite and bring out the best in people.
Natural disasters such as hurricanes and earthquakes have served to bring
communities together and impact the nation as a whole. Americans have given
generously to rebuild communities and help local residents through these
difficult situations. Many people have also
responded to tragedies worldwide or have made donations to wildlife and
environmental charities. And when we give, most of us simply give from the heart
and do not always consider the financial implications. In many instances, there
are ways to increase your gifts. The charity can receive a more substantial gift
and you can increase your tax benefits. The charitable remainder trust is a
popular estate-planning strategy that could enable you to gift an appreciated
property or security and retain an interest income for you and your family. Once your gift is put in a
charitable trust, you will receive a current income tax deduction. Neither party
will owe taxes on this transfer or upon the appreciation of the asset. The trust
will usually sell the asset and reinvest the proceeds in an income-producing
investment. You can receive this income in exchange for gifting the ownership of
the asset to the charity. You will then need to
decide how you would like to receive income. You can receive either a percentage
of the value of the trust or a fixed amount. With a percentage allocation, your
income will vary based on the current value of the trust. Some even offer a
“make-up” clause. If the trust is not able to provide the designated income
for one year, the shortfall will be added to the following year’s
distribution. Trusts that provide a
fixed amount each year will not be able to take advantage of future growth or
higher earnings of the asset, but they do offer consistent income even in a
stagnating market. Choosing a trustee and
clearly stating your intentions in the trust document and to the trustee are of
vital importance. Once the trust is in place, it is an irrevocable instrument.
Even if the charity does not receive any benefit for several decades, it will
eventually assume ownership. In the meantime, the trustee is in charge of
controlling the assets in the trust. Choose someone who knows how to handle
financial matters and who will carry out your intentions. A charitable remainder
trust may allow you to make a substantial gift to charity, avoid capital gains
tax, and provide regular income for you and your family. The use of trusts involves a complex web of tax rules and regulations. You might consider enlisting the counsel of an experienced estate-planning professional before implementing such sophisticated strategies. © 2003 Emerald Publications
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