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Preparing for What Can Go Wrong, Investing in What Can Go Right - Part 2 - Blog 3

Preparing for What Can Go Wrong, Investing in What Can Go Right - Part 2 - Blog 3

| October 19, 2022

Now that you have some tools to prepare you for maximizing your Social Security benefits and some knowledge on navigating Medicare so that you use those benefits to the best of your advantage, it’s time to talk about covering your hide - er, I mean estate planning and charitable giving!

I’m sure you are wondering about how you cover yourself with estate planning and philanthropy when the point is to make your estate easier to settle for your heirs and beneficiaries and to give to others. But not so fast, my friend - your estate can benefit you when you are still living, so it makes sense to get it right for everyone involved, including you.

What can my estate do for me?

One of the best ways to put your estate to work for you while you are alive is to create a Charitable Remainder Trust or CRT. A charitable remainder trust (CRT) is an irrevocable trust that generates a potential income stream for you, as the donor to the CRT, or other beneficiaries, with the remainder of the donated assets going to your favorite charity or charities.

This charitable giving strategy generates income and can enable you to pursue your philanthropic goals while also helping provide for your retirement living expenses. Charitable trusts can offer flexibility and some control over your intended charitable beneficiaries as well as lifetime income, thereby helping with retirement, estate planning, and tax management. Not too shabby, huh?

Here’s how it works. A charitable remainder trust is a “split interest” giving vehicle that allows you to make contributions to the trust and be eligible for a partial tax deduction based on the CRT’s assets that will pass to charitable beneficiaries. The great part is that you can name yourself or someone else to receive a potential income stream for a term of years, no more than 20, or for the life of one or more non-charitable beneficiaries, and then name one or more charities to receive the remainder of the donated assets. 

But let me say that again cause it’s good - you can name yourself as the beneficiary and receive an income stream for a specific time period. That means you have yet another source of tax-efficient retirement income.

First, you make a partially tax-deductible donation of cash, stocks, or non-publicly traded assets like real estate, private business interests, or private company stock, and you become eligible to take a partial tax deduction. The partial income tax deduction is based on the type of trust, the term of the trust, the projected income payments, and IRS interest rates that assume a certain rate of growth of trust assets.

Then you or your chosen beneficiaries receive an income stream based on how you set up the trust. You or your stated beneficiaries can receive income annually, semi-annually, quarterly, or monthly. Per the IRS, the annual annuity must be at least 5% but no more than 50% of the trust’s assets. Simple enough, right?

After the specified timespan or the death of the last income beneficiary, the remaining CRT assets are distributed to the designated charitable beneficiaries. When the CRT terminates, the remaining CRT assets are distributed to the charitable beneficiary, which can be public charities or private foundations. 

Now, of course, there are nuances to this; for example, depending on how the CRT is established, the trustee may have the power to change the CRT's charitable beneficiary during the lifetime of the trust. However, the Charitable Remainder Trust is a vehicle that is often overlooked when it comes to retirement planning, and it is one way to create a tax-efficient income stream for you while also providing for your charitable interests.

Tune in next week when we will close out our two-month series with a look at the stepped-up basis and estate planning.

Until next time…

One last thought, I believe an educated investor is an empowered investor. If you like what you’ve read and think your friends and family can benefit as well, please share.


1 Charitable Remainder Trusts 


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested in directly.

All investing involves risk, including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Dollar-cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.