Charitable Remainder Trust

The Charitable Remainder Unitrust (CRUT) and the Charitable Remainder Annuity Trust (CRAT) pay income to one or more individuals for life, or for a term of years. After the designated time period, the amount remaining in the trust passes to PRI for use as indicated by the donor.

Q. What are the advantages of creating an irrevocable CRAT or CRUT?
A. The donor is entitled to a federal income tax charitable deduction in the year the trust is funded for a portion of the gift amount. If appreciated securities or real estate which have been held long-term are contributed to the trust, there is a complete avoidance of capital gains tax.

This arrangement could result in an increase in income to the donor if the charitable trust pays out more than he/she was receiving from the assets transferred to the trust. This is possible because the trustee can sell the contributed assets (stocks or land for example) and reinvest for a higher yield without worrying about capital gains tax implications.

The estate and gift tax deduction allowed for such trusts may be useful in reducing the tax burden on your estate.

Because of the available income payments and tax deductions, you and other friends of PRI may be able to make much larger contributions than would otherwise be possible.

Q. How large a contribution is necessary to create a Charitable Remainder Trust (CRT)?
A. Most people do not find it practical to fund a charitable remainder trust with less than $100,000 because of the cost and time involved in creating and administering the trust.

Q. Which type of CRT is best for me?
A. The CRAT is appropriate for people who can make a large gift of cash or securities and who want to know exactly how much income they will receive each year. The payout from the annuity trust is a fixed dollar amount determined when the trust is first funded by the donor. In most cases the charitable income tax deduction is larger than with the CRUT.

The CRUT is appropriate for large gifts of cash, securities or real estate by people who prefer a variable payout. The payments to the income beneficiaries of a Unitrust fluctuate as the value of the trust principal changes over the years. The Unitrust, unlike the Annuity Trust, can accept additional contributions that you might wish to make from time to time. This is convenient because it does not require setting up a new trust and can be particularly effective in conjunction with gifts from your will.

Q. How would I create a CRT?
A. Discuss your plans with an attorney who is experienced in this type of work.

Q. Who should be trustee?
A. An individual or corporation experienced in handling the duties and responsibilities of a trustee and in whom you have confidence. Many people select a bank or trust company as trustee, or co-trustees. Ask your attorney or investment advisor for other suggestions.

Q. Can I create a CRT in my will?
A.Yes. You might wish to include such a trust in your will as a way to provide income for a surviving spouse, parent, child or friend. After the trust expires a gift would go to PRI.

Q. What types of assets should I give to a CRT?
A. Generally speaking, highly appreciated assets that are not yielding much income are ideal assets to place in charitable remainder trusts. That could include real estate or securities. Tangible personal property is not a good asset to fund a charitable trust established during your lifetime.

Also often used to fund charitable trusts are:

• Municipal bonds
• Common stocks and bonds which are only slightly appreciated in value
• Closely-held stock in family business
• Life insurance policies
• Cash

For more information contact:

John Campbell
Director, Foundations and Major Gifts
415-955-6107
Fax: 415-989-2411
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