Charitable Remainder Trust Attorneys Serving Mississippi

More estate planners are choosing to include a charitable remainder trust (CRT) in their estate plans. CRTs can help estate planners save taxes and increase their income and earning potential while giving to their favorite charities. 

Charitable remainder trusts allow estate planners to convert their highly appreciated assets, such as real estate or stocks, into an income stream they can use during their lifetimes. The Mississippi estate planning attorneys at Palmer & Slay, PLLC, have an in-depth understanding of how charitable trusts work. We can help you decide whether creating a charitable trust could help you meet your financial and estate planning goals. 

What Is a Charitable Remainder Trust?

There are two main types of trust: revocable and irrevocable trust. Charitable remainder trusts are considered irrevocable trusts. As the name suggests, once an irrevocable trust has been created, it can be difficult to revoke or change the terms of the trust agreement. After working with an attorney to create the trust agreement, you will fund the trust by transferring an appreciated asset into the trust. 

In other words, you will no longer own the asset, and it will not be included in your estate, so no estate taxes will be doing it when you pass away. At that point, the trust will own the asset, and the trustee or trustees you’ve appointed will manage the asset for the beneficiary’s benefit. You can be your own trustee, but you should ensure you can administer the trust properly. Sometimes, people appoint a bank or trust company to manage their trustees to ensure the assets are properly managed. 

The trustee can sell the trust’s assets, take the proceeds, and reinvest them in income-producing assets. You will receive an income from the trust for the rest of your life. When managed well by the trustee, you can receive payments fully from the interest earned by the principal assets in the trust. When you pass away, the assets that remain in the trust will be transferred to the charities you have chosen as your beneficiaries.

CRTs Provide Estate Planners with an Income During Their Lifetimes

Trust income can be paid to you for the rest of your lifetime, and if you are married, you can receive an income for as long as you or your spouse lives. You can also stipulate that the income from the trust should be paid to your children during their lifetimes or to any other person or entity you choose. However, there are a few requirements regarding who can receive income from a charitable remainder trust during their lifetime. 

An attorney can also help you understand whether the beneficiary you choose may have to pay a gift and a state tax on the income. Charitable trust agreements should clearly state how long the trust will continue. You can continue receiving income from the trust for up to 20 years. However, you don’t have to take income from the trust now. Generally, income from a trust will be taxable the year you receive it. You may benefit from creating the trust and using the income tax deduction now but delay receiving income from the trust later. If the trust assets are managed well, they will likely appreciate and value considerably, creating more income for you.

Charitable Remainder Unitrust (CRUT)

A charitable remainder unitrust (CRUT) allows estate planners to receive a percentage of the total value of the trust assets every year. The amount you receive will not be a fixed number; instead, it will be a percentage of the total value of all the assets in the trust. You may want to create a unit trust if your goal is to receive an income that will decrease or increase along with the total value of the assets in the trust. 

Assuming that the value of the assets increases over time, choosing this type of trust will allow you to enjoy more income over the years, which can help account for inflation. However, there’s always the risk that the assets will devalue, and so will the amount of income you draw from the trust. 

Charitable Remainder Annuity Trust (CRAT)

There are a few different types of charitable remainder trusts. Speaking to an experienced estate planning attorney can help you understand the pros and cons of each type of trust. For example, if you want a monthly fixed income from your trust, you will benefit from creating a charitable remainder annuity trust (CRAT). The amount of income you receive from the trust won’t change depending on the performance of the assets the trust owns. 

This type of trust may be beneficial if you are approaching or in retirement. Although it may not provide inflation protection to the same degree as a unitrust, some estate planners enjoy the security of having the same amount of annual income they can depend on. If you plan on creating an annuity trust, it’s usually best to fund the trust with readily marketable assets or cash.

Tax Benefits that Come with Charitable Remainder Trusts 

Whether you create an annuity or unitrust trust, it’s important to remember that the Internal Revenue Service (IRS) requires the payout rate set forth in the trust agreement to be at least five percent or over 50 percent of the trust’s assets’ initial fair market value. 

Increasing Your Net-Worth Through a Charitable Remainder Trust

Real estate planners can increase their net worth through a charitable remainder trust in several ways. First, if you transferred stock into the trash that pays very little or no dividend income, so trust me, I will be able to pay you the higher rate of return you’ve outlined in your trust agreement. Trustees can reinvest the stock into higher-yield investments, providing you with more income. 

You won’t incur capital gains taxes on the income you receive from the trust, and you’ll also be able to take advantage of a federal income tax deduction. Additionally, creating a trust will reduce the value of assets and property in your state, which can result in significantly better estate tax treatment.

Schedule a Consultation with Our Mississippi Charitable Remainder Trust Attorney

Many estate planners create charitable remainder trusts to give money to their favorite charities while ensuring they receive income from their assets throughout their lives. If you are considering creating a charitable remainder trust or have any other questions about your estate plan, don’t hesitate to contact Palmer & Slay, PLLC.

Palmer & Slay, PLLC, is dedicated to assisting clients within Mississippi, including Scott County, Rankin County, Brandon, Flowood, East Jackson, and beyond.