Charitable Remainder Trust (“CRT”) Summary

Overview of a CRT.

• A CRT is a general term for a class of irrevocable trusts that initially benefit noncharitable beneficiaries with the remaining assets passing to charity at the expiration of the trust term.
• The non-charitable beneficiaries will receive an annual payment from the trust.
• To qualify, initial calculations must show that it is likely that at least 10% of the net value of the trust will be paid to a public charity.
• You can retain the right to alter the named noncharitable beneficiary in your Will.
• You can also change the remainder charitable beneficiary while you are alive.

Tax Consequences.

• There will be no capital gains assessed on the transfer of the property into the trust or upon the sale of trust assets.
• The annual payments to the non-charitable beneficiaries are subject to income tax or capital gains tax.
• • There are certain limitations on the amount that can be deducted based upon your Adjusted Gross Income (AGI) and the type of property you contribute to the CRT.
• The amount of the available charitable deduction is based on the present fair market value (FMV) of the charity’s remainder interest.
• You cannot use the trust to pay any estate or gift taxes.
• In most situations, everything contributed to the trust will be outside of your estate for estate tax purposes.

Payments to Noncharitable Beneficiaries.

The annual payment is either a fixed percentage of the value of the trust chosen at the time the CRT is formed (called a Charitable Remainder Annuity Trust (CRAT)), or a fixed percentage of the value of the trust assets as they change over time (called a Charitable Remainder Unitrust (CRUT)).

Investment Power.

The trustee has wide discretion in the management and investment of the trust assets so long as they meet their fiduciary duty and do not engage in “self-dealing.”