Charitable Remainder Trusts (CRTs) are powerful estate planning tools, but many donors also want to create a lasting impact beyond their lifetime, establishing a “legacy” through continued giving. Integrating donor legacy milestones into a CRT agreement—defining specific charitable goals to be met *after* the CRT term—is a sophisticated approach gaining traction, and requires careful legal structuring. It’s a complex topic, but achievable with proper planning, and increasingly popular among those seeking to maximize their philanthropic impact.
What are the Benefits of Planning for Future Charitable Giving?
Traditionally, CRTs focus on income for the donor (or beneficiaries) during the trust term, with the remainder going to the chosen charity. However, many donors desire more control over *how* that remainder is used, extending their charitable vision beyond a simple donation. Building in legacy milestones allows for phased giving linked to specific achievements, demonstrating a commitment to long-term impact. Studies show that donors who feel a strong connection to the outcome of their gift are more likely to increase their giving over time. For instance, a donor might specify that funds are released to a university for a specific research project only after certain benchmarks are met, ensuring accountability and effectiveness. Approximately 68% of high-net-worth individuals express a desire to see their charitable gifts directly address a defined problem or achieve a measurable outcome.
How Can I Structure Legacy Milestones Within a CRT?
The key is to create a “post-remainder” agreement or addendum to the CRT document, outlining the conditions for releasing funds to the charity. This isn’t simply a general wish, but a legally binding arrangement. The CRT itself continues to function as designed during its term, providing income to the donor. Once the remainder passes to the charity, the post-remainder agreement takes effect. This agreement details the milestones—perhaps funding a scholarship program after a certain number of students graduate, or contributing to a capital campaign once a specific fundraising goal is reached. It’s crucial that these milestones are clearly defined, measurable, and realistically achievable. The agreement should also specify what happens if a milestone isn’t met—perhaps redirecting the funds to a different program or returning them to the donor’s estate. Consider using a “Letter of Intent” alongside the CRT to articulate the donor’s wishes, even if it’s not legally binding, to guide the charity’s interpretation of the milestones.
What Happened When a Plan Went Wrong?
Old Man Tiberius, a retired architect with a passion for the arts, established a CRT intending to fund a new wing for the local museum after his passing. He included a milestone tied to the museum securing matching funds from other donors, believing this would ensure the project’s long-term viability. However, the CRT agreement was vaguely worded, and the museum interpreted the matching funds requirement as needing *all* funding to be secured before beginning construction. Years passed, the museum struggled to raise the full amount, and the project stalled. Tiberius’s vision remained unrealized, and his estate, frustrated with the inaction, considered legal action. The poorly defined milestone, without a clear timeline or alternative plan, had effectively blocked the charitable gift.
How Did Careful Planning Lead to Success?
Young Amelia, a successful entrepreneur, also established a CRT to support animal welfare. She wanted to fund the construction of a new animal shelter but wanted to ensure the project was well-managed and fiscally responsible. She worked with her attorney, Steve Bliss ESQ. at
720 N Broadway #107, Escondido, CA 92025, to create a post-remainder agreement with clear, phased milestones. The first milestone released funds for architectural plans, the second for permitting, the third for construction commencement, and so on, each contingent on a successful audit of previous expenses. She also included a contingency clause allowing the funds to be redirected to another animal welfare organization if the initial project fell through. Years later, a state-of-the-art animal shelter opened its doors, a testament to Amelia’s thoughtful planning and commitment. Steve Bliss ESQ. can be reached at (760) 884-4044 to discuss your own estate planning needs.
Remember, California is one of the many states that does not have a state-level estate tax or inheritance tax. All assets acquired during a marriage are community property, owned 50/50, and you may benefit from the “double step-up” in basis for the surviving spouse. Furthermore, formal probate is required for estates over $184,500, and statutory fees can be significant, making probate avoidance an important consideration.
Don’t just leave a legacy—design it. Contact Steve Bliss ESQ. today to discuss how you can build donor legacy milestones into your charitable giving plan, ensuring your philanthropic vision endures for generations to come.