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Annuity Trusts

Charitable Remainder Annuity Trust- "CRAT"

CRATs are ideal for those who want the security of fixed payments, regardless of how the trust investments perform or how volatile market conditions may be. You may establish a CRAT by donating cash or readily marketable securities.

The trust pays beneficiaries a fixed amount that cannot be less than 5% of the value of the original trust principal.  You may name any number of beneficiaries, although it is customary to designate yourself (or you and your spouse) as life income beneficiaries.

The trust terminates upon the death of the last beneficiary (or at the end of a term of years up to twenty). At termination, the remaining assets are transferred to The English-Speaking Union to use as you designate in the trust agreement.

There are numerous tax advantages. You are entitled to a charitable deduction for a portion of your gift, according to IRS formulas. If you donate highly appreciated stocks or mutual funds, you will completely avoid capital gains tax as well. If your CRAT is established at death (by will), your estate saves estate taxes. For example:

Donna A. is 65 years old and wishes to convert some of her appreciated low-yield stock into a steady source of income: She establishes a charitable annuity trust with $100,000 worth of stock that originally cost $50,000 and sets the payout rate at 5%.

The trust will pay her $5,000 every year for life - no matter how the market fluctuates. She is entitled to an income tax deduction of $42,000 and avoids $7,500 in capital gains tax. Aside from those financial benefits, Donna is gratified to know that after her lifetime, her gift will support The English-Speaking Union as a legacy to her passion for its mission and programs.

Suggested Minimum: $100,000 (Cash or appreciated securities). 

Age: 65