A Charitable Remainder Trust is an irrevocable trust designed to convert an investor's money, securities, or other assets to a trust that will then pay the investor an income for life or for a period of years. The amount of income received may be fixed at the time the trust is created, or the trust can be created in such a way that the income can fluctuate over time with the performance of the assets in the trust. At the end of the trust period, the property remaining in the trust (the charitable remainder) becomes the property of the charitable organization selected by the donor.
There are two basic types of charitable remainder trusts:
Annuity Trust: A charitable remainder annuity trust pays out each year at a fixed dollar amount.
Unitrust: A charitable remainder unitrust pays out each year an amount generally equal to a fixed percentage of the value of trust assets for that particular year. The trust assets are usually valued on the first business day of each taxable year.
Charitable Remainder Trusts allow the donor to receive gift, estate, and income tax deductions in the year of the gift for the value of the gift portion of the trust.
