Charitable Remainder Trust in Coral Gables

A charitable remainder trust (CRT) is a legal entity that offers the combination of substantial tax benefits and contributions to your favorite charity. This estate planning tool lets you place a large amount of money in a trust, where you can still profit from it for the rest of your life. 

After your passing, most of this money is transferred to the charity of your choosing, but you also have options for leaving some of those funds for your heirs. With the help of a knowledgeable trusts attorney like Ana M. Veliz, you could benefit from setting up a charitable remainder trust in Coral Gables.  

How Charitable Remainder Trusts Work

These trusts serve a straightforward purpose—they take ownership of a person’s asset, pay that person the income from the interest earned during their lifetime, and then transfers the property to a charitable organization following their death. Under the law, there must be at least $100,000 in value in order to create this type of trust. 

It is important to understand how this process works, as there are multiple steps involved. First and foremost, a charitable remainder trust is irrevocable, meaning the creator gives up all legal ownership of a valuable asset that is transferred to the trust. A third party—often the intended charity—acts as the trustee. It is their job to invest these assets and make the payments to the creator.

Receiving Income

One of the most important advantages of this approach is the ability to continue earning income from the donated assets. The way the creator receives this income can vary. Many decide to go with a fixed amount to be paid out annually. Others take a percentage of the value of the trust in case the income is less than anticipated. 

The creator has the ability to set this amount, but there are tax implications to consider. The more that is paid out each year, the less the creator can deduct from their income taxes. 

The important thing to remember is that the way these payments are structured depends entirely on the language in the originating documents. A dedicated attorney in Coral Gables can create a charitable remainder trust with the ideal income structure in place.

Tax Advantages of a CRT

Another important consideration for these trusts is the potential tax advantages. They come in many different forms, both for the creator and their heirs. First and foremost, the creator can consider much of the initial funding as a charitable contribution and deduct it from their income taxes. The immediate impact on the income tax bill is notable, but that is only one factor to keep in mind. If a person is likely to be subject to the federal estate tax, this is a useful tool for lowering their total assets and falling below the threshold that would trigger this tax. 

Finally, property owners frequently choose this path because of the substantial capital gains tax savings. When real estate is sold for far more than the purchase price, the tax bill can be hefty. Placing the real estate into the charitable remainder trust liquidates that value with owing so much to the government. 

Talk to an Attorney in Coral Gables About Setting Up a Charitable Remainder Trust

Charitable remainder trusts are a popular way of controlling your assets while also setting some aside for a great cause that you care about. If you have questions about how this approach might work for you, now is the time to get answers. The estate planning team at our law firm could help you understand whether a charitable remainder trust in Coral Gables is the right decision for you. Call today to learn more about what is required.