| Life Income And Other Gifts
Like any trust, a Charitable Remainder Trust (CRT) is a distinct legal entity that owns and manages assets. It lasts either for a period of up to 20 years or for the lifetime(s) of one or more individuals. Each year during its existence, it makes payments to the individual(s). When it ends, its remaining assets are distributed to the Community Foundation.
On the one hand, a CRT can be structured to pay an annuity, i.e., a fixed amount each year, in which case it is called a Charitable Remainder Annuity Trust or “CRAT,” for short. This is generally attractive to older persons or to those who need steady cash flow for a relatively limited number of years.
Far more frequently, however, a CRT will take the form of a unitrust or “CRUT,” for short. Each year, such a trust pays a predetermined percentage of the value of the trust’s assets at the beginning of the year. This means the amount paid by the trust will almost always fluctuate from year to year, depending on the trust’s investment results. A CRUT can be appropriate in a variety of circumstances and for people of differing ages.
Actually, either type of trust can be suitable for donors who want both to make a sizeable charitable gift and arrange a stream of payments for themselves using securities or sometimes certain other long-term appreciated assets, particularly if the assets currently produce little or no cash flow. No capital gains tax is paid either when the assets are transferred to the trust or when the trust sells them, although capital gain does typically flow out over time in the form of payments.
Another tax benefit of a CRT is the large deduction a donor receives in connection with funding the trust. A CRT will usually offer estate tax benefits as well, depending on who other than the donor will receive payments.
Even though the Community Foundation can serve as the trustee of a CRT, you have many other options. Yet, regardless of who serves as trustee, when you name the Community Foundation as the remainder beneficiary of a CRT, you are able to provide eventual support for potentially any number of charitable organizations.
Life Income And Other Gifts
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