Naming Charities as Remainder Beneficiaries

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You’ve worked hard to build what you have. It makes sense that you’d want some of it to go to the causes you care most about. Naming a charity as a remainder beneficiary in your estate plan is one of the most meaningful things you can do, and it can also provide real financial benefits along the way. At Slowik Estate Planning in Atlanta, Georgia, we help clients think through these decisions carefully so their plans reflect both their values and their goals.

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What Does It Mean to Name a Charity as a Remainder Beneficiary?

When you name a charity as a remainder beneficiary, you are directing that a portion (or all) of what remains in a trust or estate passes to a charitable organization after other interests have been satisfied. This is different from leaving a flat gift in a will. A remainder interest means the charity receives what is left over after income payments have been made to you or other named individuals during the trust’s term.

The most common structure for this is a Charitable Remainder Trust, often called a CRT. A charitable remainder trust (CRT) is an irrevocable trust that generates a potential income stream for you, as the donor to the CRT, or other beneficiaries, with the remainder of the donated assets going to your favorite charity or charities. Think of it as a two-stage gift. First, the trust pays income to you or your loved ones. Then, when the trust ends, the remaining assets go to the charity you named.

There are two main types of CRTs. A charitable remainder annuity trust (CRAT) pays a specific dollar amount each year, which is at least 5% and no more than 50% of the value of the corpus when the trust is established. The second type is a charitable remainder unitrust, or CRUT. The unitrust pays you, each year, a variable amount based on a fixed percentage of the fair market value of the trust assets, and the amount of your payments is redetermined annually. Each type has its own advantages depending on your financial situation and goals.

You can also name a charity as a remainder beneficiary directly in your will or through a beneficiary designation on a retirement account or life insurance policy. These simpler methods don’t involve the same income stream structure as a CRT, but they are still powerful tools. Working with an estate planning attorney in Atlanta helps you choose the right approach for your situation. The right method depends on what assets you own, how much income you need during your lifetime, and how much you want to give.

The Tax Benefits of Naming a Charity as a Remainder Beneficiary

One of the biggest reasons people choose this strategy is the tax benefit. When you fund a CRT, you get a partial charitable deduction right away. Contributions to a charitable remainder trust qualify for a partial charitable deduction, limited to the present value of the charitable organization’s remainder interest, calculated as the value of the donated property minus the present value of the annuity.

The deduction amount depends on several factors. The partial income tax deduction is based on the type of trust, the term of the trust, the projected income payments, and IRS interest rates that assume a certain rate of growth of trust assets. In practical terms, this means your age, the payout rate you choose, and current IRS rates all play a role in calculating exactly how much you can deduct.

There is also a significant capital gains benefit. If you own appreciated assets, like real estate or stock that has grown in value, transferring them to a CRT allows the trust to sell those assets without triggering an immediate capital gains tax. The trust can then reinvest the full proceeds, giving you a larger income base. CRTs are split-interest trusts that have a noncharitable income beneficiary during the trust’s term and a charitable beneficiary entitled to the remainder, and they can work best for those with low-basis assets who need an income stream from that asset and have a desire to donate what is left over to charity.

There are also estate tax benefits to consider. A CRT may reduce or eliminate estate taxes because assets contributed to a CRT may be removed from your estate for estate tax purposes. For high-net-worth individuals in Atlanta, this can mean a significant reduction in the taxable value of the estate. Keep in mind that tax laws change, and the specific benefits available to you depend on your personal financial picture. Consulting with an Atlanta estate planning lawyer is the best way to understand how these rules apply to your estate.

Georgia Law and Charitable Trusts

Georgia has a well-developed legal framework for charitable trusts. Georgia recognizes charitable trusts, discretionary trusts, express trusts, implied trusts, life insurance trusts, marital trusts, QTIP trusts, resulting trusts, spendthrift trusts, testamentary trusts, and Totten trusts. Charitable trusts in Georgia are governed primarily under the Georgia Trust Code, found in O.C.G.A. Title 53, Chapter 12. Sections 53-12-110 through 53-12-116 address charitable trusts specifically.

Under Georgia law, a charitable trust must be created for a valid charitable purpose. This includes purposes like education, religion, relief of poverty, and other community benefits. The trust must be properly drafted and funded to meet both state and federal requirements. Georgia courts have upheld charitable trusts in a number of cases, including Roughton v. Jones, 225 Ga. 774 (1969) and Henderson v. Collins, 245 Ga. 776 (1980).

It is also important to understand how federal tax law interacts with your Georgia estate plan. Under IRC Section 664, a CRT is generally exempt from federal income tax. IRC 664(c) provides that unitrusts and annuity trusts are generally exempt from all taxes imposed by Subtitle A, Chapter 1, of the Internal Revenue Code, including the federal income tax. However, this exemption is not automatic if the trust has unrelated business income.

One important issue for Georgia residents involves what happens to the tax basis of assets held in certain irrevocable trusts. Under IRS Rev. Rul. 2023-2, if you transfer assets to an irrevocable trust as a completed gift, and those assets are not included in your gross estate at death, the assets do not receive a step-up in basis under IRC Section 1014. This means the trust’s assets retain your original cost basis, not the fair market value at your death. This is a critical planning consideration when deciding how to structure a charitable remainder trust, and it is one more reason to work through the details carefully with a qualified attorney.

Georgia also has rules about simultaneous death under O.C.G.A. Title 53, Chapter 10. If a beneficiary and another individual die at the same time, Georgia law determines how property is distributed. When charities are named as remainder beneficiaries, these rules generally do not affect the charitable gift, but they can matter in more complex trust structures. Proper drafting by your attorney accounts for these possibilities.

Choosing the Right Charity and Structuring the Gift

Not every organization qualifies to receive a charitable remainder interest. The IRS requires that the remainder beneficiary be a qualified charitable organization under IRC Section 501(c)(3). When the CRT terminates, the remaining CRT assets are distributed to the charitable beneficiary, which can be public charities or private foundations. Before naming any organization, you should confirm that it holds valid 501(c)(3) status. You can verify this through the IRS Tax Exempt Organization Search tool on the IRS website.

You can name more than one charity. You can also give your trustee some flexibility. Depending on how the CRT is established, the trustee may have the power to change the CRT’s charitable beneficiary during the lifetime of the trust. This can be helpful if your charitable priorities change over time. Some people combine a CRT with a donor-advised fund for even more flexibility in directing where the final gift goes.

You also need to think about what assets to contribute. You can donate cash, stocks, or non-publicly traded assets such as real estate, private business interests, and private company stock and become eligible to take a partial tax deduction. Each type of asset carries different tax implications. Appreciated stock, for example, can be especially effective because the trust can sell it without triggering an immediate capital gains tax.

The IRS also requires that the charitable remainder interest be worth at least 10% of the initial fair market value of the assets transferred to the trust. This is a hard rule. If your planned payout rate is too high or the trust term is too long, the trust may not qualify. Your attorney and financial advisor will run the numbers to make sure your trust structure meets this requirement before any assets are transferred.

If you are thinking beyond financial assets, Georgia law also allows for creative planning. For example, if you have a pet guardianships arrangement in your estate plan, the remainder of a pet trust after your pet passes can also be directed to a charity of your choice. This kind of layered planning is something Slowik Estate Planning can help you think through.

How Slowik Estate Planning Can Help You in Atlanta

Naming a charity as a remainder beneficiary is not something you want to handle with a generic online form. The rules are specific, the tax implications are real, and a poorly drafted trust can fail to qualify, leaving your charitable goals unfulfilled and your estate with unexpected tax consequences. Slowik Estate Planning works with Atlanta-area clients to build estate plans that are thoughtful, legally sound, and tailored to each person’s life and goals.

Our firm helps clients understand all of their options, including CRTs, direct charitable bequests, beneficiary designations, and more. We also help clients who need to think about Asset Protection as part of their broader estate plan. Protecting what you have built, during your lifetime and after, is just as important as deciding where it goes.

We also help trust beneficiaries understand their rights and responsibilities when they are named in a trust. If you are a beneficiary of a trust that includes a charitable remainder interest, we can help you understand how the trust works and what to expect.

Every estate plan we draft is designed to hold up under Georgia law and federal tax rules. We take the time to explain your options in plain language so you can make decisions with confidence. If giving back to your community is important to you, we want to help you do that in a way that also makes smart financial sense. Slowik Estate Planning is located in Atlanta, Georgia, and serves clients throughout the metro area. Contact us today to schedule a consultation and start building a plan that reflects what matters most to you.

FAQs About Naming Charities as Remainder Beneficiaries in Atlanta, Georgia

What is a remainder beneficiary in a charitable trust?

A remainder beneficiary is the person or organization that receives what is left in a trust after all other interests have been paid out. In a charitable remainder trust, the charity named as the remainder beneficiary receives the assets that remain after the income period ends. This could be after your death, after the death of another named income beneficiary, or after a set number of years, depending on how the trust is written.

Does Georgia have any special rules for charitable remainder trusts?

Georgia recognizes charitable trusts under O.C.G.A. Title 53, Chapter 12, and the state’s courts have upheld them in a number of cases. Georgia charitable trusts must be created for a valid charitable purpose and must comply with both state trust law and federal IRS requirements under IRC Section 664. Because Georgia does not have a state income tax on charitable deductions in the same way the federal government does, the primary tax planning for CRTs in Georgia focuses on federal tax rules. An Atlanta estate planning attorney can help you make sure your trust meets all applicable requirements.

Can I receive income from a charitable remainder trust during my lifetime?

Yes. That is one of the main features of a CRT. You transfer assets to the trust, and the trust pays you income for your lifetime or for a set term of years, which cannot exceed 20 years under IRS rules. After that period ends, the remaining assets go to the charity you named. The income you receive is taxable, and the type of tax you pay depends on the character of the income generated by the trust assets. You also receive a partial charitable deduction in the year you fund the trust.

What happens if the charity I named no longer exists when the trust ends?

This is a real concern, especially for trusts with long terms. If the named charity no longer qualifies or no longer exists when the trust terminates, the trust document should include backup provisions. A well-drafted CRT will name an alternate charitable beneficiary or give the trustee authority to redirect the remainder to another qualifying organization. This is one reason why working with an experienced estate planning attorney matters. A generic trust form may not include these protections, leaving the distribution uncertain.

Is naming a charity as a beneficiary the same as leaving a gift in my will?

Not exactly. A direct bequest in a will transfers assets outright to the charity after your death and goes through probate. A charitable remainder trust is a separate legal entity you create during your lifetime. It provides income to you or others first, then passes the remainder to charity. The CRT also offers tax benefits that a simple will bequest does not, including a current income tax deduction and potential capital gains tax deferral. Both approaches can be part of a complete estate plan, and the right choice depends on your financial situation and charitable goals.

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