A Charitable Remainder Trust provides the donor with the benefit of an immediate charitable tax deduction and an annual income that is based on an IRS Discount Rate and the age(s) of the beneficiary of the income. The benefits include:
- Improved income for the donor and/or other named beneficiaries
- Current income tax savings from a charitable deduction
- Avoidance of up-front capital gains taxes if funded with appreciated assets otherwise to be sold.
(Benefits are subject to current tax laws.)
There are two basic forms of Charitable Remainder Trusts:
- The Charitable Remainder Annuity Trust (CRAT) must pay income at a fixed amount per year, expressed either in dollars or as a percentage of the value of the initial funding assets.
- The Charitable Remainder Unit Trust (CRUT) is variable, expressed as a percentage of the annually predetermined value of trust assets, with potential either for growth or decline in dollar payment.
Age is often a factor in choosing between the two basic forms of charitable remainder trusts with older donors often preferring the security of a fixed income, while younger donors often favor the growth potential of a unitrust to offset inflation.
Consult your Financial Advisor, Tax Attorney, or Certified Financial Planner about whether a Charitable Remainder Trust is an appropriate vehicle for you and your family.