Charitable Remainder Trust
Charitable Remainder Trust
If you are considering leaving a sizeable bequest to a registered charity like JDRF Canada, a charitable remainder trust is an interesting alternative. You can arrange a significant gift immediately, and still benefit from income your gift generates without investment management concerns.
You can establish a charitable remainder trust by irrevocably transferring assets into a trust that’s managed by a trustee, either for life or for a period of time. At the end of the trust term, the remainder is distributed to JDRF Canada.
Setting up a charitable remainder trust can help you realize tax savings in life, and may also serve as an effective estate planning tool. The assets are removed from your estate, thereby protecting your privacy and reducing the chance of the gift being contested.
A charitable remainder trust is an attractive option for:
- Donors aged 60+, especially those over 75 years old
- Donors who are in an upper-income tax bracket or who have extensive holdings and have the ability to donate (some of) their assets
- Donors who wish to receive a steady income for life, or who wish to provide income for a loved one
- Aging donors who want to be free of investment decisions, management and concerns
- Donors who want an alternative to a bequest or who may be interested in combining a bequest with a charitable remainder trust
Benefits of a Charitable Remainder Trust:
- Receive a tax receipt for the present value of the donated trust
- Donors in a high marginal tax bracket will benefit from immediate tax relief
- You can carry the excess tax credit forward for up to five years if the gift exceeds 75% of your net income in the year the gift is made
- The donor or other named beneficiary will receive regular income from the trust for life or for a specific term
- An external trustee frees you from the responsibility of managing the trust’s assets
- Avoids probate costs associated with a charitable bequest
- Less likely to be contested, as the donation is not part of your estate
- Provides privacy – a Will becomes a public document upon the death of the donor, but a charitable remainder trust agreement does not
The following information can help you decide if establishing a charitable remainder trust for JDRF Canada is right for you.
Types of Charitable Remainder Trusts
Living Trust (inter vivos)
A living or inter vivos trust is where the donor funds the trust by irrevocably transferring ownership of their assets or a portion of their assets to a trustee. A trust document sets out the rules of the trust, and names JDRF Canada as the residual beneficiary. The present value of the residual interest is calculated, and JDRF Canada issues a tax receipt to the donor for that amount. Income from the trust is paid by the trustee to the beneficiary (usually the donor) for life or for a specific period. When the trust is terminated, the trustee pays out the remaining trust assets to JDRF Canada.
A testamentary trust is where the donor sets out the terms of the trust in a new Will or by revising an existing Will. Provisions for the trust are contained in specific clauses. Usually, the terms provide support to a loved one for as long as they live, with the assets coming to JDRF Canada after the beneficiary dies. A testamentary trust is irrevocable, and is established upon the donor’s death. A tax receipt for the value of the remainder trust is issued to the estate.
- Typically, the minimum amount required to set up a charitable remainder trust with a financial institution is $100,000.
- There are set-up charges and ongoing fees to manage the trust which will affect the amount of income the donor or beneficiary receives. When the trust is terminated, discharge fees may also be involved.
- In Canada, all charitable remainder trusts are irrevocable to qualify for a tax receipt.
All donors are encouraged to seek independent financial and legal counsel when executing wills, trusts, contracts and other agreements.
JDRF Canada will provide you with information and assistance on setting up a charitable remainder trust. However, the ultimate responsibility regarding evaluations, tax deductibility, and/or similar legal local, provincial or federal compliance issues rests with you and/or your counsel.
To learn more, please fill out a request for information, or contact:
JDRF Planned Giving Manager
Toll-free: 1-877-287-3533 ext. 2044
Email: [email protected]
Charitable Number: 111897 6604 RR0001