By using a CRUT, we can better serve a younger couple in a similar
circumstance, as outlined above.
As you can see from the illustration, with a successful CRUT, the
income for a younger donor can increase over time, allowing the
income stream to perhaps keep pace with inflation so the buying
power of the income stream is not diminished by inflation. Another
useful characteristic of a CRUT is it can be added to over time
without the need to create a new trust. So, with the CRUT, your
client can “add” assets to the CRUT, which allows them to take the
additional tax benefits and increase their income from the CRUT
very simply. This can be a wonderful way for your clients to build a
substantial charitable legacy in a tax-wise manner.
A charitable lead trust (CLT) turns this entire equation on its head
in that the income stream goes to charity over the term of the trust
and the remainder reverts to the donor or the donor’s designated
beneficiaries. This tool is used when a client wishes to pass a rapidly
appreciating asset to the next generation by locking in the present
value for estate and transfer tax purposes. The charity receives the
income stream, the trust or the grantor receive a charitable deduction
for the income stream to charity, and the asset eventually reverts to
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THE GAVEL
a noncharitable beneficiary. You may be able to see why the CLT is
much less common than the CRT, but it can be very useful in special
circumstances.
We have reviewed the basics of the major planned gifts that can
be used to help your clients to build a charitable legacy and utilize
the generous tax benefits available on the federal and local level. By
working with a qualified planned giving officer as part of the process,
you can ensure you are meeting your client’s charitable and financial
goals as well as helping with important community needs. The
illustrations in this article are from Crescendo CRESPRO software.
If you have a client interested in exploring one of these types of
gifts, most planned giving professionals will “run the numbers” in
CRESPRO for you at no obligation.