What is a Charitable Remainder Trust(CRT)?

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The Charitable Remainder Trust was enacted in 1969, regulated by IRS Code Sec.664. A Donor can receive the Trust Income while alive and the remainder value will be donated to Charity or to an accredited educational institution upon the donor's death. The term that a Donor (or his/her spouse) is paid from the Trust is for the life or fixed term (not in excess of 20 years). The remainder value is at least 10 percent of the initial net fair market value of all property placed in the Trust.

There are many tax benefits, including elimination of capital gain tax, depreciation recapture tax, and estate tax because of donation to charity. This Trust is the most beneficial for those who do not have any heirs, actively support charities, has low net returns on Real Estate Investment, has to pay high capital gain tax when sold, and desire to have a happy retirement. And, for those with heirs, there is a way for these individuals to inherit to them as much as they donate to charity by exercising an option below:

・A smart choice to inherit to heirs?

Set upIrrevocable Life Insurance Trust (ILIT), purchase life insurance for the same amount or more as you placed into Charitable Remainder Trust and designate your heirs as a beneficiary. With this choice, upon your death, the remainder value in CRT will be transferred to a designated charity and ILIT pays your heirs life insurance proceeds without obligation to pay estate and income taxes.

    【Benefits】
  • Capital Gains TAX, State TAX, and Estate TAX are all exempted.
  • Assets are protected from unexpected accidents or any lawsuits.
  • You can avoid Probate, (which will cost you 20% of your total assets for a 18 months to 3 years)
  • You have no headaches of property management, while enjoying steady income
  • You can purchase larger Life Insurance than gifted assets
  • You have a choice of income inflow for either a fixed amount or percentage
  • You can reduce Income Tax (computed by Actuary)

    【Notes】
  • You may be penalized if cancelled prematurely.
  • You are required to designate a Trustee
  • The CRT goes to charity rather than heirs upon death.
  • Your insurability is checked when purchasing life insurance
  • Payout must be for lifetime or a fixed term (not exceeding 20years)
  • You are not allowed to get a loan from a Trust
  • The CRT account must be free and clear, although negotiable with charities.

・Process of Charitable Remainder Trust

  1. Set up CRT
  2. Designate Trustee and Charity
  3. Transfer assets into CRT
  4. Sell the assets placed into CRT to a third party buyer
  5. Invest the proceeds from sale in annuity products, etc.
  6. Receive fixed income as determined when CRT is set up.
  7. Remainder value goes to charity upon your death

・Process of Irrevocable Life Insurance Trust

  1. Purchase life insurance for the same amount as placed into CRT (or more)
  2. Pay premium out of fixed income from CRT
  3. Family/Heirs receive proceeds upon your death
・イリボーカブル（撤回不能）生命保険信託の設定概略