Listen to a Business English Dialogue About Charitable remainder trust irrevocable trust
Ralph: Hey Julia, have you ever heard of a “charitable remainder trust irrevocable trust” in business and finance?
Julia: Yes, I have. It’s a type of trust where assets are transferred to a trust, providing income to beneficiaries for a specified period before the remaining assets are donated to charity.
Ralph: That’s right. The trust is irrevocable, meaning once it’s set up, the terms cannot be changed, providing tax benefits for the donor and supporting charitable causes.
Julia: How does the income distribution work in a charitable remainder trust irrevocable trust?
Ralph: Beneficiaries receive a predetermined percentage of the trust’s assets annually, usually based on the fair market value of the assets at the time of transfer.
Julia: Can you give an example of when someone might set up this type of trust?
Ralph: Sure, someone with appreciated assets, such as stocks or real estate, may set up a charitable remainder trust to receive income during their lifetime while also benefiting a charitable cause.
Julia: How does the charitable remainder trust irrevocable trust benefit the donor?
Ralph: The donor receives an immediate tax deduction for the present value of the future charitable donation, reducing their taxable income for the year the trust is established.
Julia: Are there any restrictions on the charities that can receive the remaining trust assets?
Ralph: Yes, the charity must be qualified under IRS regulations to receive tax-deductible donations, typically including educational, religious, scientific, or charitable organizations.
Julia: Can the donor name themselves as a beneficiary of the trust?
Ralph: Yes, the donor can choose to receive income from the trust during their lifetime before the remaining assets are transferred to the designated charity.
Julia: Thanks for explaining, Ralph. Charitable remainder trust irrevocable trusts seem like a valuable tool for estate planning and philanthropy.
Ralph: You’re welcome, Julia. They provide a way to support charitable causes while also providing financial benefits for the donor and their beneficiaries.