Many people are charitably inclined, whether it's donating money or donating clothes and books. Some want to make a bigger impact on their community with a larger gift, either during their lifetime or at death. For those who want to establish a trust, there is uncertainty that inhibits them from doing so, mainly because there is uncertainty in the market and economy, and an uncertainty in how much that individual will need for his or her own needs in retirement. Even if someone can give away assets without jeopardizing his or her future, some are concerned about reducing the inheritance to their children and heirs, as well as the impact of estate taxes on their estate. For the charitably inclined, a Charitable Remainder Trust (CRT) can be a viable solution. The CRT can also be combined with a form of Irrevocable Life Insurance Trust (ILIT) that can provide liquidity, either for the satisfaction of taxes or to ensure a legacy to your heirs. Here's how it works: A CRT is an irrevocable trust. It is a "split interest" trust because it has both charitable and non-charitable beneficiaries. The CRT can both provide you with a stream of income and arrange to have the balance of the asset held in the CRT be paid to the charity or charities of your choice when you die. You can also direct that someone else be the income beneficiary, although there may be income and gift tax consequences to doing so. When used with an ILIT, the ILIT purchases life insurance inside of the trust, keeping it from your estate and therefore free of estate tax. The beneficiaries of the ILIT are your children (or selected heirs), so that you provide them with a legacy and replace the assets that you are donating to charity. The income stream from a CRT can be structured as a fixed dollar amount (a Charitable Remainder Annuity Trust or CRAT) or as a fixed percentage of the trust assets (a Charitable Remainder Unitrust or CRUT). For maximum tax benefits, the gift transferred to the CRT is one expected to highly appreciate in value, thereby minimizing or negating the capital gains tax liability that would otherwise result. Other times it can be a low income-producing asset that can be converted to current income. Or it can be a combination of both types of assets. When the gift is made to the CRT, the donor receives a current charitable income tax deduction based on the present value of the interest that will ultimately pass to the charity, known as the remainder interest. From the income stream that derives from the CRT, you can use that income to gift to the ILIT to purchase life insurance. Advantages of a CRT: You can make a significant charitable contribution without jeopardizing your own need for income while still leaving a legacy for your children if combined with an ILIT. You receive a charitable income tax deduction for the present value of the remainder interest for the assets that will go to charity. You avoid capital gains taxes when the assets are sold by the trust if you are using highly appreciated assets. You reduce your estate for estate tax purposes by giving to charity.