Types of charitable remainder trusts

On Behalf of | Nov 5, 2020 | Firm News |

For many people, the ability to leave a financial legacy for their children and grandchildren is a lifelong dream and a high priority when making an estate plan. At the same time, these people may wish to provide some ongoing support for a philanthropic organization or a cause close to their hearts.

A charitable remainder trust may provide them the opportunity to achieve both of these things.

An income stream for children and grandchildren

As explained by Fidelity Charitable, when a person who establishes a charitable remainder trust dies, their named beneficiaries receive an ongoing income stream each year directly from the trust. This income stream may continue as long as the beneficiaries are alive or may last for a set number of years only. A charitable remainder trust may identify one or more beneficiaries.

Remaining assets to charities

When the beneficiaries die or when the designated time period for providing income to the beneficiaries ends, the remaining trust assets flow to one or more named charities, per the terms of the trust.

Two types of charitable remainder trusts

With a charitable remainder unitrust, the income received by a beneficiary represents a percent of the trust’s assets. With a charitable remainder annuity trust, a beneficiary receives a set dollar amount from the trust. Only with a charitable remainder unitrust may additional assets be put into the trust once established.

Types of assets in a charitable remainder trust

A person may title liquid assets or real property into a charitable remainder trust. According to Forbes, a charitable remainder trust may also be the named beneficiary on a person’s retirement account.