Charitable Remainder Trusts
Maybe you have assets such as cash, securities or real estate. One day, you would like to give them to Conestoga, but right now, you need the income they provide. You can always leave the assets to Conestoga in your Will, but there is another way. A Charitable Remainder Trust will allow you to make a gift now, receive immediate tax benefit and continue to receive the income for as long as you, or you and your spouse live, or for a specified number of years.
Unlike a future bequest, for which you get no tax benefit now, a Charitable Remainder Trust provides you with a donation receipt the year you make your gift. Placing the asset in trust also frees you from management responsibility and removes the property from your estate, guaranteeing your privacy.
A Charitable Remainder Trust is a legal agreement that allows you to make an irrevocable gift to Conestoga now and continue to benefit from it throughout your lifetime.
How Charitable Remainder Trusts Work
With a Charitable Remainder Trust, the donor transfers property to a trust where it is held and managed by a trustee. The trust is most commonly funded with cash, bonds, real estate or securities that are transferred irrevocably to a trustee. If the property is income producing, the net income will be paid to the donor or any other designated beneficiary. When the trust ends—usually at death or a specified term—the remainder is distributed to Conestoga. The trust is particularly beneficial from a tax standpoint for people age 70 and older.
The donation receipt the donor gets represents the value today of the future gift (the ‘charitable remainder’) which Conestoga will receive upon the death of the donor. The figure is actuarially computed, based on the amount contributed, the age of the donor, and the current discount rate (the lower the rate, the larger the donation receipt). The value of the tax receipt can be as high as 70 per cent of the face value of the trust for donors in their eighties. The amount of the donation that may be claimed in any given year is limited to 75 per cent of the donor’s net income, but the rest of it can be carried for up to five years from the time the gift is made.
You will incur capital gains tax if you contribute capital property that has increased in value since you bought it. However, you will also receive a tax receipt that will likely fully offset the tax owing.
Advantages of Charitable Remainder Trusts
- Charitable Remainder Trusts will provide you with the satisfaction of making a sizeable gift to Conestoga.
- You will continue to receive the income generated by the capital for as long as you, or you and your spouse live, or for a specified number of years.
- You will receive a donation receipt now that you can use to offset current tax liabilities.
- No matter how much taxable gain is attributable to the charitable remainder of your trust, the tax credit resulting from your donation receipt will always exceed the tax on the gain.
- A Charitable Remainder Trust removes the property from your estate, guaranteeing your privacy and reducing probate and other estate fees.
- You will be free from management responsibility of the asset.
Who Can Benefit from a Charitable Remainder Trust
- From a tax standpoint, Charitable Remainder Trusts will be primarily of interest to upper income donors who are age 70 and older.
- The donor is typically in a high marginal tax bracket, has a philanthropic intent and the ability to donate some of their assets.
- Normally a donor should be in a position to establish a trust worth at least $100,000 initially or after a few contributions, as there will be professional fees for set-up and annual administration.
Creating your Legacy with a Charitable Remainder Trust
To ensure that your particular needs are met and that your wishes are honored, you should consult legal and/or financial advisors.
At the same time, you should also contact Conestoga’s Development Office to let us know about your intentions. Not only can we assist you in making sure things move along smoothly, we also need to verify how you would like the eventual proceeds from your Charitable Remainder Trust put to use. You may, for example, want to create a permanent endowment fund in your name, or in the name of a loved one, and direct the income to a faculty, department, or research area of your choice, or you can direct it where it is needed most.
It is also important for us to know whether you wish to be recognized for your contribution or prefer to remain anonymous. Please feel confident that any request for anonymity will be strictly honoured.
Statement of Intent
If you have made arrangements to make a legacy gift to Conestoga, we request that you send us a completed Statement of Intent form (pdf) so that we may ensure proper administration of your gift.
Please contact us for more information about establishing a Charitable Remainder Trust at Conestoga.