A Charitable Remainder Trust is a type of Irrevocable Trust that benefits a current beneficiary at the beginning, but at the end of its term, the “remainder” amount passes to charity.
To satisfy the rules set up by Congress, a CRT may take the form of a Charitable Remainder Annuity Trust (CRAT) or a Charitable Remainder UniTrust (CRUT).
In a CRAT, the Grantor donates assets to the CRAT. The CRAT terms require that the Trustee pays to the beneficiary a fixed percentage of the donated asset. This takes the form of an “annuity.” The beneficiary receives a fixed amount over the trust term. At the end of the trust term, the “remainder” passes to charity.
In a CRUT, the Grantor donates assets to the CRUT. The CRUT terms require that the trustee pays to the beneficiary a set percentage of the trust assets valued each year. So, rather than receiving a fixed amount as in the CRAT, the beneficiary can receive more or less money each year.
Here are some questions clients, beneficiaries, and Trustees ask:
No, but in general the tax benefits are maximized by placing low tax basis assets in the trust.
Yes, but low-basis property usually results in a better tax result.
Yes, but these assets might be sold, so the reason for placing this property into a CRT need be well thought out.
If you have any questions about Charitable Remainder Annuity Trusts or any other estate planning topics, please contact us to schedule a free consultation. For more than two decades Klenk Law has focused only on Estate Law. We’ve seen it all, and this experience allows us to explain complex estate law and planning techniques clearly and concisely. We make it easy for you to understand CRATs or CRUTs so you can make the best decisions for yourself and your family.
Peter Klenk is the founding member of Klenk Law, a seven attorney boutique estate planning law firm. We serve clients in Pennsylvania, New Jersey, New York, Minnesota and Florida. Peter Klenk received his Masters in Taxation LL.M. from NYU Law School and his J.D. from the University of Minnesota Law School. He served his country in the Navy JAGC during Desert Storm. Easy to talk to, feel free to call Peter for an appointment. We will make the process as easy as possible!
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