Charitable Remainder Trusts (CRTs) are often used concurrently with life insurance in the estate planning process. CRTs (also called Unitrusts) are usually used when an individual has highly appreciated assets. Assume that you have some bare land worth $200,000 and a very low cost basis (i.e. you paid $20,000 for the land 30 years ago). You would like to sell the land and convert it to an asset that could pay current income to you. If you sell the land, you will have to pay a substantial capital gains tax and lose much of your asset's value in the process. An answer to this problem can be a CRT.

The landowner could make a charitable contribution of the land to a CRT. The CRT could then sell the asset and not have to pay the capital gains taxes. This would allow all the money to be reinvested in income-producing vehicles such as bonds, Ginnie Maes, CDs, income stocks, etc. The investment income can then be paid to you for the rest of your life, or it could be paid to you and your spouse for the rest of both your lives. You also receive an immediate income tax deduction -- not for $200,000, but for a lower figure based on the amount of income the CRT pays you each year, and your life expectancy. Upon your death or deaths, whatever assets are left in your trust will go to a charity that you choose.

Read About the Advantages of a CRT

Additional Information on Estate Planning:

Estate Planning Overview
Irrevocable Life Insurance Trusts (ILITS)
Using Ownership and Beneficiary Designations
How to Get Existing Policies Out of my Estate
Can the Three-Year Rule be Avoided?
Second to Die Life (Survivorship) Insurance
Gifts - Overview
Leveraging Your Gifting Program
Grandchildren
Generation Skipping
Living Trusts
Credit Bypass Trust
Charitable Remainder Trusts
Avoid Capital Gains Income for life

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