Donation of Remainder Interest
An arrangement in which property donated to a charity, but the donor (called the grantor) continues to use the property and/or receive income from it while living. The beneficiaries receive the income and the charity receives the principal after a specified period of time.
The grantor avoids any capital gains tax on the donated assets, and also gets an income tax deduction for the fair market value of the remainder interest that the trust earned. In addition, the asset is removed from the estate, reducing subsequent estate taxes.