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People with a passion for a charity or a cause may want to leave a lot of money to that cause after they pass away. One way to give money to a charity is through a charitable remainder asset. Among the reasons Colorado residents create these trusts is because they provide an avenue for charitable giving and also generate tax benefits for the person or family of the person who sets it up.

Money Crashers explains that a charitable remainder trust (CRT) can be used to pay money to one or more persons for a period of time. The individual setting up the trust, known as a trust donor, is given a tax deduction and a stream of income from the trust during this time period. At the conclusion of the time period, the charity named by the trust donor receives the remainder of the funds in the trust.

Usually, the time period of the trust is however long the trust donor lives. Once the donor passes away, the remaining amount of money in the trust goes to the charity. However, the term of the CRT cannot last for longer than twenty years. At the end of the twenty-year period, even if the trust donor is still alive, the trust remainder will pay out to the charity. This is why many people who set up a CRT do so in their advanced years.

CRTs are not used by everyone. Many wealthy individuals prefer CRTs as a way to pass on large amounts of money while enjoying tax benefits. Additionally, people of lower incomes use CRTs, especially if they reap a windfall of money because of an insurance payout, an appreciated investment, or an inheritance. Putting the money in a CRT allows a person to enjoy an income from an acquired windfall, coupled with the knowledge that some of the money will go to a charitable cause.

Charitable remainder trusts can be an effective estate planning tool, but as with any trust, there are complexities to be considered. CRTs have their expenses and as FindLaw points out, can be set up to pay out annuities or percentages. Composing the proper CRT that meets your needs and wishes will likely necessitate counsel from an attorney to understand all the options available.