OUR SERVICESThere are two types of this life income vehicle.
One, the Charitable Remainder Annuity Trust (CRAT) provides for a fixed rate of income measured, usually, by the life or lives of named individuals. Once the rate is set in the trust, it is multiplied by the value of the initial contribution to determine the lifetime annuity payments. These payments never change throughout the term of the trust. The lowest rate allowed by law is 5%. If a rate is set too high, the trust may not qualify for tax benefits. Payments may be made as frequently as quarterly.
The other, the Charitable Remainder Unitrust (CRUT) also provides for a fixed rate. The difference between the Unitrust and the CRAT is that the fixed rate is multiplied against the value of the CRUT as determined annually on the last day of the calendar year or the first business day of the next year. Assuming the assets in the CRUT increase in value over the prior annual period, the payments to the individuals in the next year will also increase by the fixed rate multiplied against the increase in value. Thus, the CRUT is anticipated to be a hedge against inflation.
Both the CRAT and CRUT provide the following benefits to a contributor:
- A fixed rate of return usually greater than earned previously on the contribution.
- Avoidance of tax on the long-term capital gain on contributed appreciated property.
- A current income tax charitable deduction for the value of the future charitable gift.
- Avoidance of estate taxes on the contribution and its appreciation in the trust.
For more information, contact Clara Nyman, Director of Development at (212) 870-4938 or cnyman@jhha.org.