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Charitable Remainder Trusts Essay

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Charitable remainder trusts. There are several types of charitable remainder trusts. We 're going to focus on the charitable remainder annuity trusts and the charitable remainder unitrust. Charitable remainder annuity trust is a gift plan defined by federal tax law that allows donors to provide payments to themselves or others while making a generous gift to charity. The payments may continue for the lifetime of the beneficiaries named by the donor or a fixed term of not more than 20 years or the combination of the two. As an annuity trust donor, donors irrevocably transfer assets, usually cash or securities, to a trustee of their choice. For example, it could be the charity; it could be a bank; it could be a trust department, some third-party …show more content…

Benefits of a charitable remainder annuity trust include the donor will qualify for an income tax deduction, just like the charitable gift annuity and the pooled income fund. The same rules apply. The same rules apply. If the donor is giving long-term appreciated property, it 's limited to 30 percent of their adjusted gross income. If it 's a gift of cash, ordinary income property, or short-term appreciated property, then it 's limited to 50 percent of their adjusted gross income. If they can 't use the charitable deduction in the year of the gift, then they can carry it forward for up to five years, subject to the same 30 percent and 50 percent limitations. The beneficiaries named by the donor will receive annual payments for life or for the period the donor designated. The donor 's estate may enjoy a reduced probate tax and estate taxes because they have transferred the asset out of the estate. It is now owned by the trust. If the donor funds the trust with long-term appreciated asset and the trust sells it, there will be no immediate tax on the capital gain. If the donor were to sell such an asset themselves, the donor would owe tax on all the capital gain realized in the sale. Again, long-term appreciated asset is one that a donor has held for more than

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