Broker Check

Advantages of Charitable Remainder Trusts

  Advantages Disadvantages
Outright
Gift
Deductible for income taxes No retained interest
Charitable
Lead
Trust

A current gift to charity

Current income tax deduction

Pass assets to heirs at a future discount

Transfer of assets is irrevocable

If current income tax deduction is taken, future income is taxable to donor

Donor gives up use of income for life of the trust

Pooled
Income
Fund

Income tax deduction

Income paid to beneficiary for life

Non-income-producing assets can be converted to income-producing assets

Income is unpredictable from year to year

Income received is taxed as ordinary income

Remainder interest will usually go to only one charity

Charitable
Remainder
Unitrust

Current income tax deduction

Avoids capital gains tax on appreciated property

Reduce future estate taxes

Transfer of assets is irrevocable

Qualified appraisal generally required

Complex administration and setup

Charitable
Remainder
Annuity
Trust

Income tax deduction

Avoids capital gains tax on appreciated property

Fixed income

Fixed payment cannot be limited to the net amount of trust income

Qualified appraisal generally required

Complex administration and setup

Gifts of
Insurance

Current income tax deduction possible

Enables donor to make a large future gift at small present cost 

May require annual premiums

In some cases the death benefit could be part of donor’s taxable estate