How does a charitable remainder trust work?

On Behalf of | Mar 21, 2020 | Estate Planning | 0 comments

When evaluating your options for your estate plan, you may realize that you can select from a variety of tools that have different benefits based on your present situation and future goals.

In addition to wills and trusts, you may have assets that require you to name a beneficiary to receive the value upon your death. These can include retirement accounts and life insurance policies. In some cases, a trust may be identified as the beneficiary of a retirement account.

Naming a charitable remainder trust as your beneficiary

As explained by Forbes, you might think about naming an adult child as the beneficiary on your retirement account. However, your child may have the potential of receiving more money in the long term if you name a charitable remainder trust (CRT) as the beneficiary. In short, a CRT provides an income stream for your child for the remainder of their life and then disperses any remaining assets to a charitable organization—selected by you or your child—after your child passes away.

The two types of charitable remainder trusts

According to SmartAsset, if you want or need the flexibility to add assets to your trust over time, you may choose to setup a charitable remainder unitrust, or a CRUT. In this type of trust, your child would receive a set percentage of the trust’s value on a regular basis. If you fund the trust with a one-time setup and do not need to add more assets to it, you may also create a charitable remainder annuity trust. This trust provides a set dollar amount to your child on a regular basis.

This information is not intended to provide legal advice but is instead meant to give residents in Oregon an overview of what a charitable remainder trust is and how the two different forms of this type of trust work. If you have any questions about planning your estate, contact a qualified estate planning attorney.