Charitable Remainder Trust

What is a Texas Charitable Remainder Trust?

Published on: February 24, 2024 | By David W. Miller

Many clients, especially after they have had an especially profitable year, ask our team about how to best structure their charitable giving. Giving money away is a noble goal, and part of our job as estate planning attorneys is to help you figure out how to have the greatest impact while still making sure your financial foundation is solid. One tool we often suggest for our clients’ charitable giving is called the charitable remainder trust. Today’s blog goes into some details about this kind of trust, so that you might be able to discern whether it could be right for you.

A charitable remainder trust is a tool that allows you to both contribute to a worthy cause and be eligible for important tax benefits. Once you deposit money into the charitable remainder trust, you automatically offset or minimize your current tax liabilities. As time goes on, you stay in some control of the money deposited in the trust, and you become eligible to receive a potential income stream from the trust itself. Then, when you pass, the remainder of the trust is given to the charity or charities of your choosing.

Because you get the trust’s tax deduction today, but you still have access to the income from the trust over your lifetime, the charitable remainder trust can truly be the best of both worlds. Importantly, a contribution to a charitable remainder trust constitutes an irrevocable transfer of cash, so it is essential to choose your contribution wisely.

Should You Establish a Charitable Remainder Trust?

Published on: November 7, 2022 | By Thomas W. McCulloch

woman retirement risks and estate planning

Individuals may wish to put some of their hard-earned assets toward charitable causes or organizations throughout and at the end of their lives. While charitable gifts and lump sum donations may seem generous, they can sometimes incur unexpected tax benefits that require caution. One way to charitably donate in a tax-savvy way is through establishing a charitable remainder trust. This can be especially wise for appreciable assets or sums large enough to exceed gift tax limitations.

What is a Charitable Remainder Trust?

Charitable remainder trusts allow people to donate to charitable causes while also generating income for themselves or another beneficiary in the meantime. First, the person who wishes to donate will place the assets—which can include cash and equity, real estate, and even business interests— into the charitable remainder trust. The assets will be paid to a beneficiary other than the charity, such as you or other named individuals like family members, for a certain period of time. This period of time is up to 20 years or the lifetime of the noncharitable beneficiaries. After that time frame, the remaining assets are transferred to one or multiple charitable causes or organizations. This transfer avoids the headache of probate.

There are two types of charitable remainder trusts: annuity trusts and unitrusts. An annuity trust will pay you or your other noncharitable beneficiary the same dollar amount of your choosing each year, regardless of assets or investments coming into the trust. A unitrust will pay a variable amount that is a percentage of the fair market value of the trust and will be recalculated each year.

Charitable Lead Trusts in Houston

Published on: July 15, 2021 | By McCulloch & Miller, PLLC

Selecting the right legal instrument for a charitable donation can help ensure that your good deed goes unpunished.

One effective but lesser-known instrument for charitable donations is the charitable lead trust (CLT). Donors can set up this type of trust in Houston to provide a stream of income to a particular charity for a pre-specified term, after which the property will revert to selected members of the donor’s family.

Charitable Giving Options

Why Children Should Be Included in Charitable Giving Plans

Published on: December 9, 2019 | By McCulloch & Miller, PLLC

A fear that children will not be motivated to have careers because of their family’s wealth is a concern. However, in the long run, it can hamper how wealth is handled by the next generation.

In a perfect world, discussing a family’s legacy should be a process that begins when children are old enough to understand concepts as simple as giving and the notion that wealth comes with social responsibilities. In reality, few discuss their philanthropic or legacy goals with their children.

CNBC’s recent article, “Don’t expect Mom and Dad to clue you in on your inheritance,” says that 8 out of 10 financial advisors said that “some” or “hardly any” of their clients involve the next generation in family philanthropy, according to a recent survey from Key Private Bank.

How will the SECURE Act Impact the Stretch IRA?

Published on: May 10, 2019 | By McCulloch & Miller, PLLC

The emphasis on the SECURE act is all about helping Americans save more for retirement. However, it may eliminate a strategy that is used by many to pass wealth across generations.

The coverage of the SECURE Act, that has been passed by the House Ways and Means Committee, is garnering considerable attention, because of its focus on helping Americans save more for retirement. One provision would require employers with 401(k) plans to make the plans available to long-term part-time workers. The $500 tax credit for small companies that open retirement plans with an automatic enrollment feature is also a popular provision.

However, as CNBC reports in its recent article “Congress may gut the 'stretch IRA' that wealthy people love,” the also bill includes a provision that would force non-spouse beneficiaries to draw down inherited retirement accounts within 10 years of the original owner's death.

Does Your Houston Estate Plan Need a Charitable Remainder Trust?

Published on: April 24, 2015 | By McCulloch & Miller, PLLC

When Detroit businessman Dick E. Morand died in 1977, he ensured that his estate would continue giving for decades after his death via a charitable remainder trust.

Morand died at the age of 87. He was founder and owner of D.E. Machinery Company and was vice president of Addy-Morand Machinery Company. His wife, Helen, died in 1976 and the couple had no children. Now, five Metro Detroit nonprofits are benefiting from Morand’s trust.

Morand’s trust is really the gift that keeps on giving.