There are two different types of charitable remainder trusts, the unitrust and the annuity trust.  Some time ago we addressed charitable remainder trusts, which can benefit both present and future beneficiaries and offer tax advantages too.  To recap:  a charitable remainder trust is an irrevocable trust that distributes payments to a (non-charitable) beneficiary during the lifetime of the trust creator, or settlor.  After the settlor’s death, the remaining trust assets go to a designated charity.

A charitable remainder unitrust (CRUT) is often referred to by its acronym.  But what distinguishes a charitable remainder unitrust from an annuity trust?  With a CRUT, the beneficiary receives annual payments, with the amount based on a percentage of the fair market value of the trust’s assets.  The trustee is responsible for re-determining this amount once per year.  So in a CRUT,  only the percentage, not the payment amount, is fixed.  The beneficiary may receive different payment amounts from year to year.  A CRUT also allows the trust settlor to contribute additional assets to grow the trust.

How does this differ from an annuity trust?  In an annuity trust, the present beneficiary receives the same payment each year that the trust is in force.  “Annuity” refers to the payment itself. The annuity amount is established when the trust is created and does not change.  Also, unlike the CRUT, the trust settlor may not add to the assets once the trust is in force, so the assets may also be considered “fixed.”

Both a CRUT and an annuity trust offer similar tax benefits.  There are no capital gains taxes due for assets contributed to the trust.  And each time a CRUT settlor contributes additional assets to the trust, he or she receives a tax deduction for a percentage of the assets contributed.

Charitable remainder trusts are just one of several trusts that can enhance your estate plan and offer different advantages both now and in the future.  If you would like to discuss trusts and how they may fit your estate planning goals and charitable inclinations, just give me a call to set up a meeting.  Contact us at your convenience, at 818.956.9200.

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Glendale, CA 91207

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