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Charitable Remainder Trusts
A Charitable Remainder Trust is established for the life of the donor and/or for the life of any beneficiary(-ies) and is irrevocable. While there are certain changes that may be made, once the trust is established, it cannot be revoked. If it is desired, the income period of the trust can be established for a specified period of time not to exceed twenty years. The twenty-year maximum does not apply if the trust life is based on the life expectancy of the income beneficiary(-ies).
Because the income is paid to one or more parties and, at the end of the trust's life, the principal and any undistributed interest is paid to a different party, a charitable remainder trust is called a split interest trust. The income portion of the trust may be either an annuity income or a unitrust income.
There are two different types of charitable remainder trusts:
A charitable remainder unitrust (see example) is a popular way to achieve tax benefits as well as a fixed annual percentage on the value of the assets in the trust. With a unitrust, the percentage rate established in the trust agreement determines the dollar amount of the unitrust interest. If the trust value changes, the payment to the beneficiary(ies) changes.
A charitable remainder annuity trust is set up to pay a fixed rate of return based on the initial valuation at the time the property is placed in the trust. It is a fixed amount of dollars based on the then market value of the trust. The trust assets are never revalued, so if the assets of the trust go up in value, the income portion does not change.
A charitable remainder trust is an attractive planning tool for the disposal of highly appreciated assets. While the assets revert to the charity rather than the heirs of the estate, the use of an irrevocable life insurance trust in conjunction with a charitable remainder trust could replace the asset's value for the heirs.
If you would like to run a simple calculation on a Charitable Remainder Trust Calculator, click on either Lives or Term (Lives for your lifetime or Term for a specific number of years).
For more information about planned gifts, please contact Stephanie Bergsma at (619) 594-7822 or by email. You may also write to: KPBS Friends for Life, 5200 Campanile Drive, San Diego, CA 92182.
