The Advantages of a Charitable Remainder Trust
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See which type of charitable trust best fits your estate plan with the FREE guide Trusts: Choose From Two Ways to Donate.View My GuideA charitable remainder trust (CRT) is a life-income gift that allows you to have an income stream during your lifetime and provide for Colorado State University later. A CRT may also generate a significant current federal tax income deduction. The added flexibility of rate and payment options not offered through other gift methods may make a CRT an excellent way to gift appreciated stock or property; because the trust is tax exempt and does not pay capital gains when assets are sold. There are two types of charitable remainder trusts and each has its own benefits:
The charitable remainder unitrust (CRUT) pays you a variable dollar amount based on a fixed percentage of the fair market value of the trust assets. The amount of your payments are based on the value of the trust assets and redetermined annually.
The charitable remainder annuity trust (CRAT) pays you a fixed dollar amount throughout the term(s) of the trust. Your payments stay the same, regardless of investment fluctuations.
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An Example of
How it Works
Susan, 60, wants to make a gift to CSU but would also like more income in the future. Susan creates a charitable remainder unitrust with annual lifetime payments to her equal to 5% of the fair market value of the trust assets as revalued annually. She funds the trust with assets valued at $500,000.
Susan receives $25,000 the first year from the trust. Subsequent payment amounts vary each year depending on the annual valuations of the trust assets. She is eligible for a federal income tax charitable deduction of $299,845* in the year she creates and funds the trust. This deduction saves Susan $95,950 in her 32% tax bracket.
*Based on a 1.2% charitable midterm federal rate. Deductions and calculations will vary depending on your personal circumstances.
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Information contained herein was accurate at the time of posting. The information on this website is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in any examples are for illustrative purposes only. References to tax rates include federal taxes only and are subject to change. State law may further impact your individual results. Annuities are subject to regulation by the State of California. Payments under such agreements, however, are not protected or otherwise guaranteed by any government agency or the California Life and Health Insurance Guarantee Association. A charitable gift annuity is not regulated by the Oklahoma Insurance Department and is not protected by a guaranty association affiliated with the Oklahoma Insurance Department. Charitable gift annuities are not regulated by and are not under the jurisdiction of the South Dakota Division of Insurance.
