Also sometimes referred to as split-interest trusts, charitable remainder trusts are set up to:
Grant a certain percentage or portion of the trust’s assets to a non-charitable party (like, for instance, a trust maker's spouse, child or other loved one)
Stop distributing the trust’s assets to this beneficiary after a certain period of time (such as, for example, after 10 years, after the beneficiary reaches a certain age or even after the beneficiary passes away)
Give the remainder of the trust’s assets to one or more chosen charities
Provide certain tax breaks to the assets of the trusts to preserve these assets for the chosen beneficiaries (i.e., the non-charitable beneficiary, as well as the chosen charities).
It’s important to point out that, when it comes to charitable remainder trusts:
The term of these trusts may extend for the duration of a beneficiary’s life or for fixed periods of up to 20 years.
There are some essential setup and ongoing maintenance costs to plan for and consider.
Capital tax gains can be eliminated for gifts of long-term appreciated securities.
In order to fully benefit from the available federal tax deduction, these trusts must be set up and administered according to some very strict terms.