What are Charitable Remainder Trusts?
Charitable Remainder Trusts (CRTs), like charitable gift annuities, are life income gifts; you transfer assets now, receiving a charitable deduction for a portion of the transfer, and you or a beneficiary receives income for the rest of your life or a fixed period of time. Both you and the charitable organization can benefit from life income gifts such as these.
You could also set up a testamentary CRT, to be established upon your passing. While you will not receive a charitable deduction, your estate will.
With a CRT, you irrevocably put assets (cash, securities, etc.) in a trust. The trust then provides income payments of at least 5% annually to you or a named beneficiary. Depending on how you set up the trust, the payments will continue for a fixed period of time, or until the death of the beneficiary. At that time, the remaining assets are transferred from the trust to a charitable organization such as the James L. Maher Center. When you set up your CRT, you can designate how you would like the Center to use these funds.
The amount of income paid out each year during the life of the trust depends on whether it is a charitable remainder annuity trust or a charitable remainder unitrust.
A Charitable Remainder Annuity Trust provides a fixed dollar amount with each payment to the beneficiary. This amount corresponds to a percentage of the original investment paid out annually. For example, a $100,000 charitable remainder annuity trust might pay out 7.5% annually. In this situation, the beneficiary would receive $7,500 each year for the lifetime of the beneficiary or for a fixed number of years. The $7,500 may be paid in one payment each year, or in several installments throughout the year.
The amount paid annually to the beneficiary of a Charitable Remainder Unitrust is a fixed percentage of the fair market value of the assets, as determined each year. For example, a charitable remainder unitrust might pay out 6% annually. If the assets were valued at $100,000, the beneficiary would receive $6,000 that year (6% of $100,000). If the assets were valued at $125,000 the next year, the beneficiary would receive $7,500 (6% of $125,000). As with a charitable remainder annuity trust, the payments may be made in one payment each year, or in several installments throughout the year.