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Frequently Asked Questions

If a trust agreement is established as irrevocable, it means that it can't be revoked (broken) except under unusual circumstances. Why would anyone want an irrevocable trust?

There are always specific reasons for making an irrevocable trust agreement. Perhaps it involves a family business where some of the family members are getting on in years and the family wants to make certain that management continues to run smoothly even if hindrances, such as senility, enter the picture.

Many times the reasons for an irrevocable trust involve estate and/or income tax avoidance. In order to be successful in such avoidance, the trustor must not have any direct or indirect power or control over the trust property or income. The regulations on this subject, set out in the Internal Revenue Code, must be carefully followed.

What is the difference between a charitable remainder unitrust and a charitable remainder annuity trust?

The major difference is in the valuation of the assets of the trust, which establishes part of the calculation for the determination of the amount of income received by the income beneficiary(-ies). The annuity assets are valued at the time the assets are placed in the trust. The trust assets are never revalued. Annual payments remain the same, whether the assets appreciate (increase in value)or depreciate (lose value).

The assets in the unitrust are revalued annually. If the trust assets appreciate, the payment to the income beneficiary(-ies) will increase. If the trust assets depreciate, the payment will decrease.

What happens to my assets in a trust for a charity if the charity goes out of business before the expiration of the trust?

Your trustee is authorized to name a substitute, if that is the sole charity.

Should I name a charity as trustee of my charitable remainder trust?

This is often done if the organization is qualified to so act under local law. The organization's representatives can satisfy you in that regard. Often they will serve without fee, which is an additional incentive.

Can I use my insurance to benefit charitable organizations?

Yes. This is an area overlooked by many. You can name one or more charities as alternate or as primary beneficiary. Furthermore, if you no longer need the policy proceeds in your estate for use now, you can transfer ownership of the policy to the charity or charities. If the policy has cash loan value, the charity can draw this out and use it. In this case, you not only receive a charitable gift deduction, but any additional premiums you pay are tax deductible for you now. And, on your death, the charity receives the balance of the policy proceeds and none of it is included in your estate for tax purposes.