THE CHARITABLE REMAINDER TRUST (CRT)

A charitable remainder trust pays a beneficiary first, typically the trust creator or members of the family. At the time of the beneficiary’s death, or at the end of a specified period of time, the remainder of the trust goes to charity.

• A CRT allows you to transfer appreciated assets into the trust, avoid taxes on the sale of the assets, and receive an immediate tax deduction.

• Those assets are then liquidated and can be reinvested to produce income that goes to you or others designated by you for a specified period.

• At the end of the trust period, the remainder balance goes to your chosen charity—in this case, Liberty Counsel. We work with National Christian Foundation which will help you establish a Giving Fund (donor-advised fund), a creative solution that can be named as the trust’s charitable beneficiary.

• With the Giving Fund, you have the flexibility of specifically designating your charitable recipients, including Liberty Counsel.

(This information is taken from materials prepared by the National Christian Foundation.)

THE CHARITABLE LEAD TRUST (CLT)

With the charitable lead trust, money is paid first to a charity for a specified amount of time. At the end of the trust period, the balance of the trust goes to a designated beneficiary, typically the family of the trust creator.

• A CLT allows you to transfer assets into the trust, pay income to charity for a fixed number of years, and then (upon your death or at the end of the trust period) pay the remaining balance in the trust to your family or another (noncharitable) beneficiary.

• We work with National Christian Foundation which will help you establish a Giving Fund (donor-advised fund). Liberty Counsel can be named as your trust’s charitable beneficiary.

• You can either lock in the amount of annual payments from the trust to your Giving Fund (charitable lead annuity trust), or you may elect to have the amount of annual payments vary each year (charitable lead unitrust).

(This information is taken from materials prepared by the National Christian Foundation.)

AN ILLUSTRATION OF A CHARITABLE REMAINDER TRUST

(Taken from materials produced by the National Christian Foundation)

Luke has $1 million in publicly traded stock in which he has a cost basis of $200,000. Through a dividend yield of 2%, this stock provides Luke with an annual income of $20,000 before taxes. In order for Luke to achieve a higher income from this investment, he can either (a) sell the stock and reinvest or (b) contribute the stock to a charitable remainder trust, which will make payments to Luke over a specified period of time.

Suppose Luke chooses to sell the stock and reinvest the proceeds. He will owe long-term capital gain tax of $160,000 ($1 million - $200,000 x 20%) plus any applicable state taxes. By investing the net proceeds of $840,000 (assuming no state tax) and drawing out 7% per year, Luke will have an annual income of $58,800 before taxes.

By contrast, if Luke contributes the stock to a Charitable Remainder Trust (CRT), he receives an income tax deduction in the year of the gift. The trust sells the stock without incurring any capital gain taxes, and Luke draws an annual income of 7% of $1 million $70,000. Best of all, Luke gets to support his charitable giving goals.

By contributing the stock to a charitable remainder trust, Luke not only makes a major gift to charity, he also receives about 19% more income than if he had sold the stock himself.