Has anyone set up Charitable Remainder Trust?

[tenant13]

I've just learned about the existence of these trusts (https://smartasset.com/retirement/charitable-remainder-trust). They are kind of like annuities - unless I'm not understanding something.

I'm working on a my end-of-life estate paperwork and being single with no heirs it's all a bit complicated to set up. So I thought of this: the lawyer wants me to set up a Revocable Living Trust. I wonder if I could add a clause to my healthcare directive that in case of disability or incapacitation this revocable living trust automatically converts to a CRT. That would provide a steady stream of income financing my care and remove the possibility of my agent (designated by the power of attorney) just selling my assets and disappearing.

 

[GrayHare]

I think you could achieve the same goal in a simpler manner via an irrevocable living trust with a payout percentage as you desire. CRTs have more limitations than ILTs, more requirements, and more paperwork. CRTs are more useful if you need a tax deduction now for a charitable contribution.

 

[tenant13]

I think you could achieve the same goal in a simpler manner via an irrevocable living trust with a payout percentage as you desire. CRTs have more limitations than ILTs, more requirements, and more paperwork. CRTs are more useful if you need a tax deduction now for a charitable contribution.

I didn't realize I could do that. I thought that the IRL simply means giving up control - setting up payouts seems like retaining a bit of it. I'll look into into. Thank you.

 

[LateToFIRE]

I have zero experience with CRT's, but have been curious to learn more so very interested in the topic. I have some highly-appreciated (i.e. massive capital gain liability) investment real estate that I plan to sell and would consider placing in a CRT if it would help avoid/delay the tax hit. A good chunk of our estate is going to charities anyhow, so I don't mind that aspect of CRT's. And the more assets I can shelter from taxes and/or liability, the better.

 

[tenant13]

I have zero experience with CRT's, but have been curious to learn more so very interested in the topic. I have some highly-appreciated (i.e. massive capital gain liability) investment real estate that I plan to sell and would consider placing in a CRT if it would help avoid/delay the tax hit. A good chunk of our estate is going to charities anyhow, so I don't mind that aspect of CRT's. And the more assets I can shelter from taxes and/or liability, the better.

I was specifically interested in charitable remainder unitrust (CRUT) where you can make multiple contributions to the account. Then you receive a fixed percentage based on the assets within the account which is revalued each year.

In your case it's a property - so one contribution - what I had in mind would be a small CRUT set up now that could then receive more assets - either because I decide so myself or get incapacitated and my Living Trust just pours over to CRUT.

 

[GrayHare]

IIRC, to receive income from a standard irrevocable trust you would need to name someone else as trustee, which you might be uncomfortable doing. A Grantor Retained Annuity Trust is a form of irrevocable trust that you can both control and receive a payout from, but like a CRT it involves additional paperwork such as filing an annual accounting statement with the IRS.

 

[GrayHare]

You wish to put property, meaning real esate, into a CRUT? Not sure if that is allowed. A CRUT would pay you an annual unitrust amount (much like an annuity) but it does so by selling trust assets if needed. If you, say, place your house into a CRUT, the CRUT might need to sell it to fund your annual payment.

 

[tenant13]

You wish to put property, meaning real esate, into a CRUT? Not sure if that is allowed. A CRUT would pay you an annual unitrust amount (much like an annuity) but it does so by selling trust assets if needed. If you, say, place your house into a CRUT, the CRUT might need to sell it to fund your annual payment.

No, in my case it's just equity - real estate was another user. Also, in my case the only benefit I'm interested in is a potential annuity once I'm disabled or incapacitated. I don't care about taxes or what happens after I die.

 

[GrayHare]

It seems the advantage of a trust for your situation is an alternate trustee can take over if you become disabled or incapacitated. Banks and brokerages have trust management departments, and they will be happy to oversee the trust for you, for a fee, of course. Whether they will manage it exactly as you prefer can never be certain, of course, but decent oversight of your assets is more likely to happen than if you do not have a trust. FWIW, it sounds to me like you are planning appropriately.

 

[tenant13]

It seems the advantage of a trust for your situation is an alternate trustee can take over if you become disabled or incapacitated. Banks and brokerages have trust management departments, and they will be happy to oversee the trust for you, for a fee, of course. Whether they will manage it exactly as you prefer can never be certain, of course, but decent oversight of your assets is more likely to happen than if you do not have a trust. FWIW, it sounds to me like you are planning appropriately.

I will have a Living Trust for my non tIRA assets. I'm not sure what to do with my non-US based real estate, it cannot be owned by non-local citizens (I have dual). For now when I know what I'm doing and am physically fine, it's all irrelevant. It's also irrelevant for when I'm dead since I don't care about what happens then. I'm trying to plan for the genetically high possibility of getting dementia or turning otherwise messed up but not ready to be cut off as per my medical directive. I think I have enough assets but would feel safer if I could set up their distribution myself - hence this idea of trust based annuity.

 

[LateToFIRE]

I was specifically interested in charitable remainder unitrust (CRUT) where you can make multiple contributions to the account. Then you receive a fixed percentage based on the assets within the account which is revalued each year.

In your case it's a property - so one contribution - what I had in mind would be a small CRUT set up now that could then receive more assets - either because I decide so myself or get incapacitated and my Living Trust just pours over to CRUT.

I should clarify, would contribute the property to the trust and invest the proceeds in securities - intent to avoid/reduce/defer capital gains tax.

 

[rk911]

I think you could achieve the same goal in a simpler manner via an irrevocable living trust with a payout percentage as you desire. CRTs have more limitations than ILTs, more requirements, and more paperwork. CRTs are more useful if you need a tax deduction now for a charitable contribution.

This is what we have done. No way to know precisely what the value of our estate will be upon the second death so we designated X-number of charities to each receive Y% of the total.