Charitable Remainder Trusts (CRTs) offer a compelling strategy for individuals seeking to support charitable causes while also receiving income during their lifetime, but the question of where those trust assets are *held* is surprisingly nuanced.
What are the rules around holding CRT assets?
Generally, a CRT’s assets *can* be held at a different financial institution than the one initially used to fund the trust—but it’s not always straightforward. The IRS doesn’t mandate a specific custodian; however, the trustee has a fiduciary duty to manage the assets prudently. This means selecting a custodian that is financially stable, offers competitive fees, and provides adequate record-keeping. According to a 2023 study by Cerulli Associates, approximately 65% of CRTs are held at large brokerage firms, with the remaining assets spread across banks, mutual fund companies, and other custodians. The key is ensuring the custodian is equipped to handle the complex reporting requirements associated with CRTs, particularly the annual IRS Form 990 reporting.
What happens if I want to move my CRT assets?
Moving CRT assets involves a process called a “trustee-to-trustee transfer.” This avoids triggering a taxable event, as the assets aren’t actually distributed to you. The original trustee instructs the current custodian to transfer the assets directly to the new custodian. It’s vital to document this process meticulously; failure to do so could be interpreted as a distribution, leading to immediate taxation. I once worked with a client, Eleanor, who decided she wanted to move her CRT assets after becoming dissatisfied with her initial custodian’s customer service. Unfortunately, she attempted the transfer herself, without properly notifying the initial trustee. The IRS flagged the transaction as a distribution, and she faced a significant tax bill before we could rectify the situation with amended returns and penalty abatement requests.
What are the implications of choosing a different custodian?
Selecting a new custodian can offer several benefits, such as lower fees, better investment options, or more personalized service. However, it’s crucial to consider the potential complexities. The new custodian will need all the necessary documentation, including the original trust agreement, the most recent account statements, and any relevant tax forms. The trustee is responsible for ensuring the transition is seamless and compliant with IRS regulations. Failure to do so can result in penalties, audits, and even the disqualification of the trust. This often requires working closely with both the old and new custodians to coordinate the transfer and ensure all records are accurately maintained.
How can I avoid problems when transferring CRT assets?
I recall another client, Arthur, a retired engineer, who proactively approached me after establishing his CRT. He wanted to ensure a smooth transition for his assets when the time came. We meticulously documented the entire process, including a written request to the original custodian, confirmation from the new custodian, and a clear audit trail of all transactions. Years later, when his health declined and he needed to adjust his investment strategy, the transfer was seamless. It’s a perfect example of how proactive planning and adherence to best practices can safeguard your charitable legacy. To ensure everything runs smoothly, always consult with an estate planning attorney and a qualified financial advisor before initiating any transfer of CRT assets, and always prioritize clear documentation and communication.
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About Steve Bliss at Escondido Probate Law:
Escondido Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Escondido Probate Law. Our probate attorney will probate the estate. Attorney probate at Escondido Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Escondido Probate law will petition to open probate for you. Don’t go through a costly probate call Escondido Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Escondido Probate Law is a great estate lawyer. Affordable Legal Services.
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● Probate Law: Efficiently navigate the court process.
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● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
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Map To Steve Bliss Law in Temecula:
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Escondido Probate Law720 N Broadway #107, Escondido, CA 92025
(760)884-4044
Feel free to ask Attorney Steve Bliss about: “What happens to my debts when I die?” Or “What does it mean for an estate to be “intestate”?” or “Can I change or cancel my living trust? and even: “Can I transfer assets before filing for bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.