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Giving to the Foundation: Ways To Give

Charitable Remainder Trusts

Charitable Remainder Annuity Trust (CRAT)

The donor during his/her lifetime irrevocably transfers money or securities to a trustee who pays the donor for life a fixed dollar amount annually. The trust can also provide income for the donor’s survivor (a spouse) for life or for the lifetime of another individual. At the death of the last income beneficiary the trust assets become the sole property of the Foundation. The donor determines at the outset the annual fixed dollar amount he/she wishes to receive. The charitable remainder amount must be at least 10% of the initial value of the assets used to create the trust. The minimum amount needed to establish a charitable remainder annuity trust is $50,000.

Example: If an annuity trust has a 7% payout and its initial value is $100,000, the payment for the first year will be $7,000. If the value of the trust assets increases to $110,000 in the second year, the payment will still be $7,000 in the second year.

During the donor’s lifetime the trust is managed and invested by the trustee as a single fund. The donor cannot borrow or otherwise deal with the trust assets. The income received by the donor each year is often taxed as ordinary income, capital gain income, or can even be tax-free income.

Charitable Remainder Unitrust (CRUT)

The unitrust is very similar to the annuity trust, except that the unitrust provides a variable income. The donor during his/her lifetime irrevocably transfers money, securities, or real estate to a trustee (such as a bank), who pays the donor income for life. The trust can also provide income for the donor’s survivor (a spouse or another individual) for life, and the trust assets eventually benefit the Foundation. During the donor’s lifetime all receipts are managed and invested by the trustee as a single fund. The donor cannot borrow or otherwise deal with the trust assets.

The donor receives payment based on a fixed percentage of the fair market value of the trust assets valued each year. The fixed percentage must be 5% or greater of the annual fair market value (FMV) of the trust assets. The donor gets a charitable deduction on his or her income tax returns in the year he/she creates the unitrust. The income received by the donor each year is often taxed as ordinary income, capital gain income, or can be tax-free income.

Example: The assets are valued annually to determine how much money is paid out to the beneficiaries each year. A 7% unitrust valued at $100,000 its first year will pay out $7,000. If the trust assets are valued at $110,000 its second year, the payout will be $7,700.

The charitable remainder unitrust must be 9% or more of the original FMV of trust assets. The minimum amount needed to establish a charitable remainder annuity trust is $50,000.