Charitable Remainder Trusts

There are two basic types of charitable remainder trusts (CRT): the annuity trust and the unitrust. Both can help you increase income, reduce your income taxes and help you eliminate capital-gains tax.

When you establish a CRT, you provide money, stock or other assets to a trust you create that will then pay you income for life or a period of time (not to exceed 20 years). You may create the trust so that it will pay income to other beneficiaries. Upon the death of the final beneficiary, the balance of the trust goes to support the TMC Foundation. You determine the amount you want to contribute to the trust and the rate of income, usually ranging from 5 percent to 7 percent, depending on the number of beneficiaries and their ages.

The charitable remainder uni-trust (CRUT) creates a hedge against inflation over the long term by paying you a life income based on a set percentage of the trust’s market value. The value and the amount of your annual income from the trust change as the market fluctuates.

Example:
You create a 7 percent CRUT with $100,000 in assets. You receive $7,000 the first year and $7,700 the next year when the assets are worth $110,000. However, if the value of the trust drops to $90,000, you would be paid $6,300 that year.

The charitable remainder annuity trust (CRAT) provides a secure fixed life income while reducing market risks, with steady income that remains the same each year regardless of what happens with the stock and bond market. When income is not sufficient to meet the established payout, principal will be used. Income will be paid as long as principal remains in the trust.

Example:
You establish a CRAT with $100,000 in assets and choose lifetime income of $6,000 annually, payable quarterly, for you and your spouse, if s/he survives you. You and your spouse will receive $6,000 every year from the trust so long as there is principal in the trust, regardless of stock market performance. Any remaining funds will be transferred to the TMC Foundation upon your death.

Call (520) 324-5982 for more information.