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Creating a Legacy – The 411 on CRT

on March 4, 2022 in General by Truman Heartland Community Foundation

If you have a sizable retirement account you will be leaving to an heir, they will be required to completely withdraw all the assets within ten years of your passing.

If you have a sizable retirement account you will be leaving to an heir, they will be required to completely withdraw all the assets within ten years of your passing. (Read about the SECURE Act). This can be a real worry for the recipients of your IRA, as the taxable distributions will often be larger, and therefore, the taxes they must pay will be higher.

For charitably minded people, a Testamentary Charitable Remainder Trust (CRT) may be an option to consider. A CRT replaces the now obsolete stretch IRA plan and helps you double your impact by including both your family and your favorite charity in your legacy planning. By naming the CRT as the beneficiary of your IRA, your retirement plan’s assets can be paid to the CRT upon death. Therefore, no taxes are paid on the IRA when it is distributed to the trust. The IRA’s principal value is preserved, invested, and grows tax-free inside the trust.

With a CRT, you can designate the trust beneficiaries, payout rates, and terms; from a lifetime or up to 20 years. This helps provide larger payouts over time and reduces estate and income taxes for your family members. And once all the payments have been made to your heirs, the trust will provide a significant donation to your favorite charity or cause.

Be sure to discuss all your retirement assets with your professional advisor. A little planning today will preserve the principal value of your IRA, provide larger payouts to your heirs, and allow you to support your favorite causes.

Learn more about CRTs and planning your legacy.