Catholics who are financially blessed often have appreciated real estate, stocks, mutual funds and other assets. These forms of assets have created great wealth, on paper, for many individuals. However, many people are not tangibly benefiting from their appreciated investments since they may be receiving relatively little income from their holdings. Often times, people are interested in selling their appreciated low yield investments yet they decide against it because of the income tax they would have to pay. A Charitable Remainder Trust (“CRT”) can provide a solution to this problem while simultaneously generating charitable gifts for Catholic nonprofits.

Why Is the CRT So Popular? The CRT has become very popular with Catholic investors who are concerned about protecting the large gains they have made in this volatile stock market. Against this unsettled backdrop of a roller-coaster stock market, many investors are becoming interested in financial strategies that can insulate them from the volatility in the stock market. A CRT can be an excellent strategy to help Catholics protect their investment gains and generate increased cash flow during their lifetimes. With all of these benefits, it is no wonder that many Catholics feel that the CRT is one of the best ways to advance their personal financial goals while also supporting Catholic charities.

How Does A CRT Work? You donate an appreciated asset into a charitable remainder trust. Since the trust is tax-exempt, it can sell the asset tax-free and avoid capital gains tax. The sales proceeds are then reinvested for a higher rate of return, providing you with potentially higher income. You receive a tax-saving charitable income tax deduction, which will also produce additional cash flow. This is because our organization benefits later on from the remaining trust value after all payments have been made to the beneficiaries.

Using A CRT To Provide A Responsible Inheritance. The income beneficiaries of a CRT are typically the donor and spouse, if married. However, for parents who are concerned about their children misspending a lump-sum inheritance, the CRT can be an effective way to pass on an inheritance to their heirs. This is because statistics show that when a child receives a lump-sum inheritance, the inheritance is often entirely gone within one (1) year. With a CRT, you can designate a child or other heir as the income beneficiary and provide them a secure lifetime income instead of a lump-sum to possibly be squandered.

Because of the CRT's importance as an effective planning strategy, Catholics should become familiar with situations where a CRT can work. CRT's work well for a person who: 1) is 55 or older, 2) has an appreciated asset like a rental property, stock or other investment which they would like to sell, 3) is interested in increasing their lifetime income, 4) is looking to reduce their income tax and estate tax, and 5) is interested in making a planned gift to a Catholic nonprofit using funds that may otherwise be lost to taxes.