Charitable Remainder Trust

There are two types of charitable remainder trusts:

  • Charitable Remainder Annuity Trust - A good choice for those wanting to make a gift that furnishes a predictable yearly income, the annuity trust pays a fixed dollar amount annually to the beneficiaries based on a percentage of the trust's initial value. The amount cannot change during the life of the trust. A portion of the annuity payment may be considered a tax-free return of principal. An income tax deduction is allowed for the difference between the value of the gift and the present value of the annuity.
  • Charitable Remainder Unitrust - Trust assets are revalued annually allowing potential growth in income to the beneficiaries. In addition, additional contributions can be made to the trust. Upon the death of the final beneficiary, the charity receives the principal and distributes it according to the donor's wishes. An income tax deduction is allowed for an amount equal to the present value of the college's remainder interest in the trust.

These trusts can be created during your lifetime or through a will. They provide a number of benefits.

  • Remove assets from your estate, reducing or eliminating estate taxes.
  • CRT's are irrevocable, so you receive an income tax deduction for the "remainder" value of the trust as calculated by an IRS formula.
  • Receive income during your lifetime.  With a testamentary trust, your beneficiaries will receive income for a set period of time.
  • You are giving to a charity, so you will not have to pay capital gains on the sale of your appreciated assets, no matter how low your cost basis.
  • Provide a gift to the university that you may not be able to provide by through other means.

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