As your Peachtree City estate planning attorney will tell you, there are numerous ways you can lawfully avoid subjecting your hard-earned money to excessive taxes. One way is to place funds or property in irrevocable charitable trusts. These investment tools benefit you and your estate, as well as a favorite charity.
Some of these trust accounts provide predictable annual income for you or a charity – and then when the trust is designed to end, the remainder goes to a charity or a designated beneficiary. This general description should become easier to understand once you review the slightly more detailed definitions below. Before choosing to create one of these trusts, keep in mind that the IRS may periodically change the requirements governing them because the agency wants to make sure that you’re truly providing a substantial benefit to a designated charity, while also reaping tax benefits.
Definitions for CRATs, CRUTs, CLATs and CLUTs
- A CRAT (charitable remainder annuity trust) is an estate planning tool that allows you to make annual payments to a designated beneficiary – until this irrevocable trust is set to expire. At that time, the trust funds are given to the charity you’ve designated;
- A CRUT (charitable remainder unitrust) is another trust that allows payment to an income beneficiary for set number of years. When this trust expires, the remainder also goes to a charity. (Note: This trust involves rather complex percentages that must be accurately recomputed every year);
- A CLAT (a charitable lead annuity trust) that’s viewed as the opposite of the CRAT already referenced above. This is because when you design a CLAT, the charity receives the annual income – with the remainder going to the grantor’s heirs when the grantor passes away;
- A CLUT (charitable lead unitrust) is often described as the reverse of the CRUT referenced above. This is because a CLUT pays the charity an annual income for a precise term – and then gives the remainder of it to the grantor’s heirs. (Should these trust accounts’ differences be confusing to you, your Peachtree City estate planning attorney can explain them in greater detail to you during an appointment).
If you like, you can review the changes the IRS made to various legal requirements governing CLUTs (“split-interest” trusts) during the past decade.
To obtain help with satisfying all of your Georgia estate planning needs, please contact the Law Offices of Shane Smith today. You can schedule your free initial consultation with a knowledgeable Peachtree City estate planning attorney by calling: (770) 487-8999.