Charitable Remainder Trusts allow you to make a substantial donation to Alley Cat Allies and still have a guaranteed income for life. They offer great flexibility:
- They can be tailored to your needs and assets;
- They can be set up to offer income to you or your designated beneficiary;
- You can designate that the income be paid for a set number of years (the maximum is 20) or for the beneficiary’s lifetime;
- You can designate the percentage of the trust to be paid out (minimum is 5%).
There are two basic kinds of Charitable Remainder Trusts, the unitrust, which provides variable income and the annuity trust, which provides fixed income.
The Charitable Remainder Annuity Trust (CRAT) pays a set dollar amount each year, which is equal to your chosen percentage of the original fair market value of the trust.
The Charitable Remainder Unitrust (CRUT) pays a variable amount each year, equal to the chosen percentage of the changing value of the trust. As the value of your unitrust changes each year, so will the income. Charitable Remainder Unitrusts are often set up for gifts of real estate, closely held stock, collectibles or cash.
Both types of remainder trusts offer significant tax advantages.
First, the trust itself is tax-exempt. Therefore, appreciated assets donated to the trust can be sold without incurring capital gains tax, allowing the full sale proceeds to be reinvested.
Second, no income tax is paid for the duration of the trust on undistributed income or capital gain.
Finally, you will be entitled to an immediate income tax deduction for a portion of the value of your gift. The lower percentage payout you choose, the larger the deduction.
If you were to establish an annuity trust at age 65, paying 6%, with $250,000 of appreciated property with a cost basis of $180,000, you would receive:
- An immediate income tax deduction of over $110,000
- $15,000 a year for life, or a term of years, your choice
If you were to establish a Unitrust at age 65, paying 6%, with $250,000 of appreciated property with a cost basis of $180,000, you would receive:
- An immediate income tax deduction of over $100,000
- Income for life, or a term of years, whichever you choose
- The first year's income would be $15,000
- Each year after that you would receive 6% of the revalued amount in the trust
To learn more about charitable remainder trusts, please contact the Development team at 1-866-309-6207, or firstname.lastname@example.org.