Charitable Remainder Trusts (CRTs) are powerful estate planning tools allowing individuals to donate assets, receive income for a period, and ultimately benefit a chosen charity. While initially structured with specific terms, the question of whether a CRT can *involve* donor advisory services post-establishment is nuanced. CRTs themselves don’t directly utilize donor-advised funds (DAFs), however, the *distribution* of assets from a CRT can certainly *benefit* a DAF, and strategically leveraging this connection is becoming increasingly common. This isn’t about changing the CRT’s core function but about intelligently directing the remaining assets after the income stream ceases. Approximately $75 billion flows into charitable giving each year, with a growing portion utilizing both CRTs and DAFs for efficient philanthropic planning. The IRS closely monitors these arrangements to ensure compliance with charitable giving regulations.
What happens when my CRT term ends?
When the term of a CRT ends – whether a set period or the donor’s lifetime – the remaining assets, known as the “remainder interest,” are distributed to the designated charity or charities. Traditionally, this meant directly gifting those funds to a public charity. However, the CRT trustee can, with proper documentation and adherence to IRS guidelines, distribute those assets *to a donor-advised fund*. This allows the donor, or their heirs, to retain some control over the ultimate charitable distribution and benefit from an immediate income tax deduction for the full fair market value of the assets transferred into the CRT initially. In 2023, over $50 billion was held in DAFs, illustrating their growing popularity and use as philanthropic vehicles. A key element is ensuring the DAF is a qualifying charity for CRT purposes.
Is it smart to use a DAF with my CRT remainder?
Strategically employing a DAF as the recipient of a CRT’s remainder interest can offer significant benefits, particularly for those with ongoing philanthropic goals. It allows for a more flexible approach to giving, enabling donors to “bank” charitable funds and distribute them over time to various organizations. This is especially useful if the initial charitable beneficiary designated in the CRT is no longer active or has changed its mission. I recall working with a retired physician, Dr. Evelyn Reed, who established a CRT intending to benefit a local hospital. Years later, the hospital merged with a larger system and shifted its focus, no longer aligning with Dr. Reed’s desired charitable impact. By structuring the CRT remainder to flow into her family’s DAF, she was able to redirect those funds to organizations focused on medical research, a cause much closer to her heart. It’s a powerful tool for adapting to changing priorities.
What went wrong when a client didn’t plan the remainder?
I once worked with a client, Mr. Harding, who established a CRT without considering what would happen to the remainder interest. He named a small, local animal shelter as the beneficiary. Years passed, and the shelter, unfortunately, fell into disrepair and eventually closed due to mismanagement. The CRT’s assets were then legally required to be distributed to an organization with a similar mission, as determined by the courts—a larger, national animal welfare organization. While still charitable, this outcome wasn’t what Mr. Harding envisioned; he preferred supporting local initiatives. This situation highlighted the critical importance of carefully considering the long-term implications of the remainder interest designation. Had he included a provision allowing the trustee to redirect the funds to a different charity if the original beneficiary ceased operations, or structured the remainder into a DAF, the outcome would have been much smoother.
How did careful planning save another client’s charitable goals?
Recently, I assisted Mrs. Silva, a passionate supporter of the arts, in establishing a CRT. We specifically included a clause allowing her CRT trustee to distribute the remainder interest to her existing donor-advised fund. A few years into the CRT’s term, Mrs. Silva’s health declined, and she realized she wouldn’t be able to actively manage her charitable giving as she had planned. Fortunately, because the remainder was directed to her DAF, her children were able to seamlessly continue her philanthropic legacy, distributing the funds to the art museums and local theaters she had always cherished. This careful planning not only ensured her charitable goals were fulfilled but also provided her family with peace of mind, knowing her wishes would be honored. It’s a testament to the power of proactive estate planning and the flexibility offered by combining CRTs and DAFs.
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About Steve Bliss Esq. at The Law Firm of Steven F. Bliss Esq.:
The Law Firm of Steven F. Bliss Esq. is Temecula Probate Law. The Law Firm Of Steven F. Bliss Esq. is a Temecula Estate Planning Attorney. Steve Bliss is an experienced probate attorney. Steve Bliss is an Estate Planning Lawyer. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Steve Bliss Law. Our probate attorney will probate the estate. Attorney probate at Steve Bliss Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Steve Bliss Law will petition to open probate for you. Don’t go through a costly probate. Call Steve Bliss Law Today for estate planning, trusts and probate.
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