Charitable Remainder Trusts

The charitable remainder trust is similar to other types of trusts except that it has a charitable beneficiary. A donor transfers property irrevocably to a trust and specifies how trust income and principal are to be distributed. The trust may be created to become effective during life or at death. A minimum gift of $100,000 is required by UGAF for Charitable Trusts.

• Charitable Remainder Unitrust ("CRUT")
  • The primary feature of the unitrust is that it provides for payment to the income beneficiary in an amount that may vary. The payment must equal a fixed percentage of the new fair market value of the trust assets valued annually. The donor determines the fixed percentage upon creation of the unitrust.
  • The unitrust payment must be made annually or at more frequent intervals to the donor and/or another beneficiary for life. Or, the unitrust may be set up for a term of years not exceeding 20.
  • The donor is allowed an income tax charitable contribution deduction equal to the present value of the Foundation's remainder interest in the unitrust that is determined by reference to Treasury Regulations. The deduction is based on the fair market value of the asset transferred, the payout rate chosen, and the age and number of beneficiaries.
  • The unitrust can be funded with cash or - ideally - with long term, highly appreciated capital gain securities or real estate.
• Charitable Remainder Annuity Trust ("CRAT")
  • The annuity trust shares many common features with the unitrust with the following exceptions:
    • The annuity trust provides for fixed income payments that may not be less than 5% of the initial fair market value of the gift in trust, and additional contributions are not permitted.
• Charitable Lead Trust
  • This trust is the reverse of a Charitable Remainder Trust in that the income generated from assets placed in trust is paid to the Foundation for a period of years, after which time the property either returns to the donor or is transferred to a named beneficiary or beneficiaries (typically, children or grandchildren). By establishing such a trust the donor is, in effect, "lending" the asset to the Foundation for the term of the trust and in doing so may obtain substantial tax benefits.