Charitable Remainder Trusts (CRTs) are sophisticated estate planning tools, but their application to create an ongoing challenge grant for a nonprofit is a nuanced question with both possibilities and limitations.
What are the benefits of using a CRT for charitable giving?
CRTs allow donors to transfer assets into a trust, receive an income stream for a set period (or for life), and then have the remaining assets distributed to a charity of their choice. This offers immediate tax benefits, like an income tax deduction, and can defer capital gains taxes on appreciated assets. According to the National Philanthropic Trust, in 2022 charitable remainder trusts accounted for $7.19 billion in irrevocable charitable giving. A CRT *can* be structured to benefit a nonprofit, but the typical setup doesn’t create a perpetually “ongoing” challenge grant. It’s more commonly a future lump-sum gift. However, with careful planning, the income stream *from* the CRT could be earmarked for a matching gift challenge, essentially funding it over time.
How does a charitable remainder trust actually work?
Essentially, a donor transfers assets (like stocks, bonds, or real estate) to the CRT. The trust then sells those assets, typically without immediate capital gains tax, and invests the proceeds. The donor (or other designated beneficiaries) receives a fixed or variable income stream from the trust for a specified term, not to exceed 20 years, or for their lifetime. The remainder of the trust assets goes to the designated charity at the end of the term. The income payments are taxable, but generally a portion is considered a return of principal and is not taxed. The initial contribution is tax deductible, subject to certain limitations based on adjusted gross income and the type of property donated. This can be a very effective way to provide for both the donor’s financial needs and their philanthropic goals.
What went wrong with the Harrison family’s plan?
Old Man Harrison, a staunch supporter of the local animal shelter, wanted to establish a perpetual challenge grant. He envisioned a fund that would match donations dollar-for-dollar, incentivizing the community to support the shelter indefinitely. He consulted with an attorney who, while competent, wasn’t deeply versed in the intricacies of CRTs. They created a CRT that designated the shelter as the remainder beneficiary, but didn’t sufficiently address the ongoing funding mechanism for the challenge. When Old Man Harrison passed, the shelter received a sizable lump sum, which they used for immediate needs, but the ‘challenge’ aspect faded quickly. Donors saw no ongoing match, and donations plateaued. The shelter realized too late that a simple CRT, while generous, hadn’t built the sustainable incentive Old Man Harrison desired; they had needed a separate endowment specifically designed for the challenge.
How did the Miller’s succeed with their challenge grant?
The Miller family, similarly passionate about their local arts council, worked with Steve Bliss, an experienced Estate Planning Attorney. They established a CRT, but *also* created a separate endowment fund within the trust, specifically earmarked for the challenge grant. The income stream from a portion of the CRT assets was dedicated to matching donations to the arts council up to a certain amount each year. The arts council publicly promoted this ongoing challenge, creating excitement and a consistent flow of donations. “It wasn’t just about the money,” explained Sarah Miller. “It was about creating a culture of giving and ensuring that the arts council had a predictable source of support for years to come.” This combination of a CRT providing a future gift and a dedicated challenge grant fund proved incredibly successful, exceeding their fundraising goals year after year. The secret? Careful planning and expert legal guidance.
Is a CRT the best tool for this purpose?
While a CRT *can* be part of the solution, it’s rarely the *entire* solution for creating an ongoing challenge grant. A more effective approach often involves combining a CRT with a separate charitable gift annuity (CGA) or a dedicated endowment fund. A CGA provides a fixed income stream to the donor (or other beneficiaries) for life, and the remainder goes to the charity. An endowment fund, established separately, provides a dedicated source of funding for the challenge grant. Ultimately, the best strategy depends on the donor’s financial situation, philanthropic goals, and the specific needs of the nonprofit organization.
<\strong>
About Steve Bliss at Escondido Probate Law:
Escondido Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Escondido Probate Law. Our probate attorney will probate the estate. Attorney probate at Escondido Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Escondido Probate law will petition to open probate for you. Don’t go through a costly probate call Escondido Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Escondido Probate Law is a great estate lawyer. Affordable Legal Services.
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
estate planning
living trust
revocable living trust
family trust
wills
banckruptcy attorney
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/oKQi5hQwZ26gkzpe9
>
Address:
Escondido Probate Law720 N Broadway #107, Escondido, CA 92025
(760)884-4044
Feel free to ask Attorney Steve Bliss about: “How does a living will differ from a regular will?” Or “What is the role of a probate referee or appraiser?” or “What happens if my successor trustee dies or is unable to serve? and even: “What should I avoid doing before filing for bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.