A charitable remainder annuity trust (CRAT) entails a donor placing a large gift of cash or property into a trust. The trust will pay a fixed amount of income each to the donor or a beneficiary that the donor has specified, such as a charitable organization. However, upon the donor’s death, the remainder of the trust is then transferred to the beneficiary, or charity specified by the donor.

Charitable remainder annuity trust requires a trustee, which can be a third party, such as an attorney or a financial advisor, or the charity itself. A donor establishes a charitable remainder annuity trust by irreversibly transferring cash or an appreciated property to the trustees. The trustee is required by the trust instrument to pay a specified annuity, which is usually at least 5% of the initial value of the assets transferred to the trust, but not more than 50% of the initial value. This specified annuity is paid to the donor or other designated individual beneficiaries for a certain period of time, often the lives of the beneficiaries, with the trust property passing to a designated charitable institution at the end of this time period. The value of the charitable remainder must be at least 10% of the net fair market value of all property transferred to the trust, previously determined at the time of the transfer. The income beneficiary of a charitable remainder annuity trust must receive the required annuity payout each year, even if the trust is not producing any income. If necessary to make the required payout, principal may have to be invaded. Unlike the charitable remainder unitrust, additional contributions cannot be made to the trust after the initial contribution.

Make American Kids Cancer Fund the charity of your choice and contact us today so we can be involved together in a charitable remainder annuity trust.