A Publication of WTVP

A Charitable Remainder Trust enables the donor to make a tax-deductible charitable gift that allows for a stream of income to be received from the assets contributed, plus a reduction in estate tax liability. The two types are the Unitrust and the Annuity Trust.

The Charitable Remainder Unitrust, commonly called a CRUT, provides an income stream to the donor or other designated individual that’s a percentage of the trust’s value, determined annually. The percentage is chosen by the donor; it must be at least 5 percent, however, and may not exceed 50 percent. Because the trust is revalued annually, the amount of payment may vary. If the trust grows at a rate greater than the unitrust percentage, the following payment will increase. If the trust grows at a rate less than the unitrust percentage, the following payment will be reduced. Additional donations to a CRUT are permissible and have the effect of both increasing unitrust payments and increasing the remainder interest passing to charity.

The Charitable Remainder Annuity Trust (CRAT) provides for a fixed, specified payment to the donor or other designated beneficiary. Again, the annuity amount must be at least 5 percent and not more than 50 percent of the amount initially contributed. No additional donations to a CRAT are permitted. The CRAT provides for a fixed payment stream to the designated individual for the term of the trust.

The donor’s charitable deduction for either a CRUT or a CRAT is calculated from the value of the property contributed. The deduction amount will vary, depending upon the size and term of the income stream, and applicable federal interest rates. Of course, the charitable beneficiary must be recognized by the IRS, but the donor can reserve the right to change or add charitable beneficiaries. To obtain tax benefits, a Charitable Remainder Trust must comply with provisions of the Internal Revenue Code.

A Net Income with Make-up Charitable Remainder Unitrust (NIMCRUT) is another variation of charitable trust. An annuity-funded NIMCRUT is offered for clients with highly-appreciate assets looking for a periodic revenue stream and immediate tax deduction with a philanthropic donative intent.

Who is it for? A Charitable Remainder Trust may benefit individuals with one or more of the flowing objectives: