Charitable Remainder Trusts
A Charitable Remainder Trust (CRT) is an irrevocable trust funded with cash, marketable securities, real estate, or a combination of the above. Income is paid to you or another beneficiary you name for up to 20 years, or for one or more person's lifetimes. When the trust term ends, the remaining property becomes a gift to the College. Tax benefits include income, gift, and estate tax deductions. When using appreciated securities to establish the trust, the capital gain is generally not subject to tax.
A Charitable Remainder Annuity Trust (CRAT) is an instrument in which donor income is fixed at a specific rate — for example, five percent per year. A Charitable Remainder Unitrust (CRUT) is an instrument in which donor income fluctuates annually as the value of the assets in the trust change. Tax-free income is also possible.
Example: William, a widower and father of one daughter, Anne, has an estate worth $1 million. To avoid unified gift and federal and state estate taxes, which would reduce Anne's inheritance, William establishes a $400,000 charitable remainder trust with Centenary named as the beneficiary, thus reducing his estate to $600,000. With part of the income generated by the charitable remainder trust, William creates a life insurance trust for $400,000, all of which will be transferred to Anne, tax-free, at William's death.