Charitable Remainder Trusts

A charitable remainder trust allows you to gift an interest in property to non-charitable beneficiaries (e.g., children, grandchildren, yourself) for a certain number of years while leaving the remaining assets to nonprofit organizations, like the Fisher Center. To create such a trust during your life, you must transfer assets (e.g., cash, stocks, real estate) to a trustee through a trust agreement. Payments from the trust are made to you and/or other designated non-charitable beneficiaries for a specified number of years. When the term of the trust ends, the assets remaining pass to the nonprofit organization.

There are two main types of charitable remainder trusts available, depending on what type of payments are made to the non-charitable beneficiaries. An “annuity trust” pays the non-charitable beneficiaries a fixed amount annually, while a “unitrust” pays the non-charitable beneficiaries a different amount, recalculated each year, based on a specified percentage of the fair market value of the assets in the trust.

Through the use of a charitable remainder trust, you may receive significant tax benefits. For example, if appreciated assets are transferred to a charitable remainder trust, no capital gains taxes are paid on the assets’ appreciation in value at the time of the transfer, even if the trustee decides to immediately sell the assets. The establishment of a charitable remainder trust also entitles you to an income tax charitable deduction. A charitable remainder trust can be created at death under your Will, allowing a possible reduction in estate taxes.

Due to the technical requirement of charitable remainder trusts, it is important to review the tax implications of such trusts with your tax advisor.