A charitable remainder trust can be an excellent strategy to set up a future income stream for you, your spouse, or your beneficiaries while still donating a respectable amount to the charity of your choosing. Like many investment vehicles, setting up a charitable remainder trust comes with an initial cost.
From set-up fees to appraisal fees, you need to know how much you can expect to shell out for the setup of your trust. How much does it cost to set up a charitable remainder trust?
This guide will walk you through the details and offer some guidance on how to save on the necessary fees.
How Much Does a Charitable Remainder Trust Cost?
If you want to set up a charitable remainder trust, you should be aware that it comes with costs that span across multiple categories. The setup of the trust is just the beginning, and participants will also face management and appraisal fees to maintain the trust moving forward.
Knowing just what you can expect to spend on these costs can help you to anticipate the losses and ensure that a CRT is the right move for you.
Setup Fees
In the very beginning of the process, you will need to consult with a provider with experience in the establishment of trusts. An attorney can handle this process, educating you and guiding you through every step of the way.
An initial consultation can be a great first step to determine if a CRT is the right move for your money or tax benefits, but this comes with a cost as well. Consultations can cost thousands, even if you decide not to set up the trust.
If you do decide to move forward with a charitable remainder trust, the setup can cost anywhere from $3,500 to $25,000. The price range depends on the the type of charitable trust and the complexity of your situation. Commercial real estate, for instance, may require additional steps and expenses.
Management Fees
After the CRT is established, you will pay administrative fees for the general management of the trust. Sometimes, the company that you use for setup will require a minimum annual fee of anywhere from $1,500 to $8,000. This typically applies if your trust is on the smaller side and may not net as much money as a larger trust.
More often, you will pay a percentage based on the value of the trust that you have funded. For the first $1 million, you may pay anywhere from 1 percent to 1.5 percent. Those fees tend to drop dramatically when you hit the $1 million to $5 million mark, with most fees capping around 0.75 percent.
You get the most value for your money when you have a trust worth more than $5 million. You can expect to pay a management fee of 0.50 percent to 0.75 percent depending on which provider is used.
Appraisal Fees
If you plan to donate anything to your trust that is not a straight cash donation, then you will need an appraisal service. The appraisal is required if you intend to use the donation as a tax write-off, so you will definitely want to ensure that you meet this requirement.
Appraisals can range in cost from $500 to $10,000 based on the type of asset you donate and the complexity of the appraisal. Funding your CRT with real estate, for example, will be more involved.
How to Save on Charitable Remainder Trust Fees
When it comes to setting up a charitable remainder trust and funding it, there are a few things you can do to minimize the fees.
Before you decide on a provider that can facilitate your trust, explore a few options. You should feel free to collect a few quotes and negotiate the fees.
However, you do not necessarily want to simply choose the cheapest option. Instead, look at the company’s experience and customer service to ensure that you are not sacrificing quality just to save on upfront costs. More experienced management of the trust will end up paying for itself.
Another way to save money on your CRT fees is to fund a sizable amount. As you saw earlier, some providers will charge lower fees if you fund over a certain amount. To get the best rates on your management fees, you may want to consider funding upwards of $1 million – or over $5 million, if you can.
Of course, the complexity of your CRT is the largest determining factor in how much you will pay in fees. Keep your plan as simple as possible. Some providers will charge more for complex assets or multiple beneficiaries. While complexity may be an unavoidable part of your unique trust requirements, simplicity is definitely worth keeping in mind when possible.
Get the Experience You Need
If you want to work with a provider that specializes in charitable remainder trusts and can help you keep fees to a minimum, Magellan Planning Group has the experience to manage your trust with confidence. We provide comprehensive estate, financial, and tax planning with an emphasis on the tax benefits associated with CRTs.
Our providers are ready and waiting to help you establish the tax structure of your trust and maintain the trust at a lower price than many of our competitors. Reach out to us today to learn more about how we can help you make the most of your wealth and reap the benefits for decades while maximizing tax benefits in the here and now!
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.