Charitable Remainder Trust

The Charitable Remainder Trust (CRT) is a well-established method of providing a lifetime income to you and/or other beneficiaries designated by you. This trust provides an immediate and substantial income tax deduction, minimizes capital gains taxes and effectively reduces estate taxes, while providing a significant gift to the Potomac Ridge Behavioral Health System program, or facility, of your choice.

CRT's are irrevocable trusts that actually provide for and maintain two sets of beneficiaries. The first set is the income beneficiaries (you and, if married, a spouse).

Income beneficiaries receive a set percentage of income for your lifetime from the trust. The second set of beneficiaries is the Potomac Ridge Behavioral Health Foundation. We would receive the principal of the trust after the income beneficiaries pass away.

Because their assets are destined for a charity, Charitable Remainder Trusts do not pay any capital gains taxes. These taxes can range from 10% to 20% of an asset's growth in value. For this reason, CRTs are ideal for assets like stocks or property with a low cost basis but highly appreciated value.

For instance, suppose you sell one of your rental properties for $1 million. Let's assume you originally paid $100,000 for the property. Upon completion of the sale, you would owe capital gains taxes on the $900,000 difference. That tax could easily top $150,000, depending on how long you owned the property and your overall tax situation.

Funding a CRT with highly appreciated assets (like real estate) allows you to sell those assets without paying any capital gains taxes. Since CRTs have a charitable intent and do not have to pay capital gains, the full value of any assets transfers to the trust.

There are two basic types of Charitable Remainder Trusts:

• The charitable remainder annuity trust pays a certain specified income to the donor/beneficiaries. Annuity trusts receive one initial gift and can make payments to the donor and/or other beneficiaries for life or a term of years.
• The charitable remainder unitrust provides income payments that vary annually. Unitrusts however, have the added benefit of being able to accept additional gifts, and, like annuity trusts, can last for various terms and can name multiple charities as the ultimate remainder beneficiary.

Charitable remainder trusts are irrevocable gifts and must be drafted with the assistance of an attorney. For information and an analysis of a proposed charitable remainder trust and/or recommendations of qualified estate planning professionals, contact us at prbhfoundation@adventisthealthcare.com or phone 301-251-4677 or toll free at 1-800-204-8600 ext. 4677.