CPAs and other accounting professionals who are familiar with estate planning can speak to the virtues of the CRT, or charitable remainder trust. In addition to the kindness shown by donating to worthy causes, the CRT is a nifty vehicle that combines large tax incentives with charitable donations upon a person’s death.
The CRT allows the charitable beneficiaries to avoid capital gains taxes because of the trusts’ exempt tax structure, and is a good arrangement for investors whose assets have high appreciated value on a low cost basis. Based on the tax perks, CRTs often are used for retirement planning to diversify a portfolio with appreciated assets; the savings realized by avoiding the capital gains can be put back into assets (on an unlimited basis) that render a higher yield.
Like any long-term savings scenario, CRTs often work at their best when they are developed alongside other retirement strategies. Besides the advantages provided to charities, a person’s own heirs also benefit because the money saved in the CRT can be applied to inheritances through other vehicles, such as risk products.