Charitable Remainder Trust

A Charitable Remainder Trust (CRT) is a planned gift where the donor irrevocably makes a gift to a charity or charities through a trust agreement. The donor contributes cash, securities, real estate or other investments like term deposits or certificates of deposit to the trust and receives an immediate donation receipt for the present value of the donated remainder interest.

The receipt amount is based on the present value of the re­­­­­­­­­­mainder interest (usually 20 to 60 percent of the value of the property), determined by the fair market value of the assets, interest rates, Donor’s age, and the specifics or duration of the trust. When the trust terminates (upon the death of beneficiaries or expiry of the term), the trustee gives the remaining trust assets to the charity.

Benefits to donors

  • This method enables you to support causes in which you believe while still providing for your heirs.
  • A trust provides a stream of steady income. This can alleviate concern while ensuring reliable funds for you, your surviving spouse, or other heirs.
  • The trust property is removed from your estate. This reduces probate fees and ensures that your charitable gift cannot be challenged, as it could in your will.
  • The charity will not be taxed on any capital gain, whether the assets are sold by the trustee, or eventually distributed to the char­ity and then sold. In addition, as the donor, you are only responsible for the capital gain that is attributable to the remainder interest.
  • You can receive tax benefits for the gift during your lifetime. You may qualify for a charitable donation receipt at the time the trust is established. Commonly, a tax receipt is issued for the value of the residual interest that belongs to the charity, and generally, older donors will receive a larger receipt.

How to create a trust

The trust is created through a trust agreement signed by the donor and trustee. The trustee may be a trust company, an individual named by the donor, or the donor. We recommend speaking to a financial advisor to help you determine how to establish a trust that best suits your wishes and circumstances.

Once a trust has been established, they can be funded with cash, securities, or real estate. Assets are placed with a trustee, whereby the owner receives the income generated by the assets in trust, according to the terms set out at the time the trust is established. The capital remains intact and the OCH Foundation receives the amount you placed in trust after your death. It is also possible to establish a trust that provides income to your surviving spouse. In this instance, the property would pass to the OCH Foundation only after both spouses have died.

Please note, most financial institutions will not establish a trust for amounts under $100,000 (in some cases, more) and they charge set-up and ongoing fees to manage the trust. This affects the amount of income the donor receives. There may also be discharge fees when the trust is terminated. Please contact us to learn more.