Why Would Someone Want to Establish a Charitable Remainder Trust?

The reasons are relatively simple. Usually, the creator of the trust (the donor) would like to create a stream of income for themselves and/or other people. They also like the idea that whatever is not distributed to those individuals will be used to support their favorite nonprofits.

Another attractive feature is that these trusts are typically exempt from taxation. The assets contributed to the trust may entitle the donor to a charitable income or estate tax deduction.

A CRT can be funded during life or after death. One popular method for funding a CRT at death is to name the trust as the beneficiary of a retirement account.

In cases where the retirement account is left directly to family or friends, these individuals can access the entire account at once. If left to the CRT, the income beneficiaries will receive a pre-determined distribution from the trust every year. This helps to protect the remainder that will eventually go to charity. It also allows the donor to exercise a bit of control over how much is distributed to their beneficiaries.