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Charitable Remainder Trust

This is a planned gift where the donor makes a gift (usually irrevocable) to a charity through a trust agreement. The donor transfers property to a trustee who holds and manages it, freeing the donor from daily investment decisions and concerns about market fluctuations.  If you are considering this type of donation, please consult an investment professional.

If the property is income-producing, the net income will be paid to the donor and/or other named beneficiary(ies). When the trust terminates (either at the death of the beneficiary(ies) or after a term of years, the trust remainder is distributed to the Foundation. If the trust is irrevocable, the donor is immediately entitled to an official tax receipt for the present value of the donated residual interest.

The formal trust agreement gives instruction to the trustee as to how the property is to be used for the benefit of the Foundation.

A charitable remainder trust can be an effective alternative to a bequest. The trust effectively removes assets from the donor's estate, producing a tax receipt that can be used immediately. A donor with highly appreciated but low-yield securities can convert them through a charitable remainder trust and receive a much higher rate of income. Additionally, the capital gains are "frozen" and are dealt with at today's value, rather than continuing to increase in value.

A living charitable remainder trust can also be made revocable, allowing the donor to reclaim the capital at any time. It is like making a pledge, but if your future circumstances change, you have the option of altering the pledge or not fulfilling the pledge.

(When the securities are held in a brokerage account, there is no need to transfer the actual certificates).

In the case of a donor who does not wish to surrender capital, but has securities producing dividend or interest income, they can donate this income to charity and receive a tax receipt for the gift. The donor would bring the interest or dividends into income, receive the dividend tax credit (if any) and use the charitable receipt against taxes owing.

To learn more about this type of donation please contact us.