Charitable Remainder Trust

We make no claims regarding the accuracy of the above information or the tax consequences stemming from your use of it. Please consult with your own tax, legal, or financial planning advisor.

A trust is a legal agreement that specifies how the assets placed under the trust will be managed. The charitable remainder trust is an attractive method to achieve a variety of goals while providing income for life and knowing that after your lifetime, the property remaining in the trust will be used by (nonprofit_name) as you specified. There are two types of charitable remainder trusts - the unitrust and annuity trust.

Unitrust: income fluctuates annually with the fair market value of the trust.

For example, Mr. Edwards irrevocably transfers $100,000 to create a charitable remainder unitrust that will provide him with life income payments. The trust agreement provides that he will receive 6 percent of the fair market value of the assets each year. The first year he receives $6,000 (100,000 x 6%). One year later the trust assets are valued at $120,000, so he is paid $7,200 ($120,000 x 6%). If the trust assets are worth $110,000 at the beginning of the next year, he will receive $6,600 ($110,000 x 6%). And so on each year. If trust income exceeds the stated payout percentage, the excess is added to the unitrust assets and reinvested.

Annuity Trust: income payments are fixed and determined when the gift is made.