What is a Charitable Remainder Trust Review?
A charitable remainder trust review is an irrevocable, tax-free trust that pays your beneficiaries for a specific duration and then its remaining assets are given to a charity.
How it works is that you, as the donor, invest cash or property into the trust and these are sold, with income going to you or your beneficiaries for a certain number of years. After the term is up, the rest of the money goes to a charity of your choice.
Since assets placed into a charitable remainder trust can’t be taken out, it’s crucial to ensure you’re happy with how the trust has been structured.
If you need to review a charitable remainder trust, you might be unsure of how to navigate the process. Read the rest of this article to explore some tips and why you should consider hiring a qualified lawyer to help you with a review.
What are Common Terms Associated with a Charitable Remainder Trust?
When setting up a charitable remainder trust, there are some terms to know about.
- Capital gains deferral. This means that the taxes are spread over time so that your assets remain invested.
- Charitable deduction. This is when, based on the charitable remainder, an immediate income tax deduction is given to the donor.
- Charitable impact. Assets go to a charitable organization according to the donor’s goals.
- CRAT (Charitable Remainder Annuity Trust). This type of trust pays a fixed amount of money annually without depending on investment performance.
- CRUT (Charitable Remainder Unitrust). In this trust, a fixed percentage of the trust’s value is paid and distributions vary according to portfolio performance.
How Do You Review a Charitable Remainder Trust?
When reviewing a charitable remainder trust, there are some key aspects to consider.
Read the Trust Agreement
Go through everything in the trust agreement, confirming that provisions which make the trust a CRAT or CRUT are properly defined. Check who created the trust and who will receive the income payments. It should be clearly stated exactly which charity will receive the charitable remainder.
Check that information in all the trust’s relevant documents is clear and consistent to prevent ambiguity. A lawyer can assist you with this task.
Verify all Payment Terms
Check which parties will receive the payments and how much money they will get. Ensure there’s clarity about when and how often beneficiaries will be paid and for how long the payments are meant to last.
You should also check the payout rate, which should be between five and 50 percent of the initial value of the trust. While higher payout rates result in higher income, they reduce how much money is left for the charity.
Research the Charitable Organization
Check that the charitable organization is aligned with the donor’s goals and that it’s approved by the Internal Revenue Service (IRS). It’s important to verify that the value going to the charity at the end of the trust term is at least 10 percent of the initial fair market value of the property or asset placed in the trust.
Check the Asset Timing
Ensure the asset is placed into the trust before it’s been committed for sale, or the donor will still have to pay capital gains taxes.
Consider the Trustee
Since a trustee will be managing the charitable remainder trust assets, donors must select a person who has experience with this specific trust. This ensures it will be managed effectively and in line with the donor’s wishes.
Do You Need a Lawyer for a Charitable Remainder Trust?
It’s advisable to hire a lawyer to review your charitable remainder trust and all its relevant documents because they have legal knowledge and experience to protect your interests.
A lawyer can help you during a trust review by:
- Checking that the trust is achieving what the donor intended.
- Confirming its structure. They’ll see if it qualifies as a CRAT or CRUT and ensure all requirements are met.
- Reviewing the payout terms and provisions so that there’s no confusion.
- Assessing the beneficiaries and charity so that there’s clarity and the trust is aligned with its main goal.
- Considering tax consequences. They’ll explain the tax processes to you to protect you and your financial interests.
- Guiding you through the process. An experienced lawyer will be there to provide legal and expert guidance, and answer any queries you might have.
Where to Find a Lawyer to Review Your Charitable Remainder Trust
If you’d like to hire a lawyer to review your charitable remainder trust, you can find one on an online legal platform that makes it easy to connect with a reputable and qualified lawyer.
ContractsCounsel is one of the largest online legal marketplaces. It connects you with a range of lawyers who have been vetted on the platform.
To request that a lawyer reviews your charitable remainder trust, here are the easy steps to follow:
- Go to the ContractsCounsel marketplace, where it’s free to post your project.
- Include a few details of what you require, or why you require a review of your trust, to match with suitable lawyers.
- Receive lawyer bids. You’ll get multiple bids from lawyers on the platform who are ready to help you.
- Review the lawyer data. ContractsCounsel provides information about lawyers on the platform, such as their location, expertise, years of experience, and client ratings for previous projects.
- Select a lawyer to work with and hire them to review your charitable remainder trust, giving you peace of mind that it’s aligned with your financial interests.
