Full Definition
A Wealth Replacement Trust is a life insurance trust that works in tandem with a Charitable Remainder Trust (CRT). When a donor creates a CRT, the donated assets ultimately pass to charity rather than heirs. To 'replace' the wealth donated to charity, the donor uses tax savings from the CRT's income tax deduction and the CRT's income stream to fund life insurance premiums in an irrevocable trust. The death benefit from the life insurance trust replaces the donated assets for the donor's heirs — tax-free. The result: charity receives the CRT assets, heirs receive the insurance death benefit, and the donor enjoyed income tax deductions and lifetime income from the CRT.
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