Charitable Remainder Annuity Trust

The annuity trust provides for payment of a fixed-dollar amount—annually or at more frequent intervals—to the designated beneficiary(ies).

The amount must equal at least 5% of the initial fair-market value of the trust. At the death of the last beneficiary, the trust principal is distributed to D-E.

In addition to the income you will receive from the trust, you will also be entitled to a charitable income-tax deduction for the value of our remainder interest in the trust assets.

Gift Range: $100,000 or more

Example: Bill and Carol purchased growth stock for $20,000 ten years ago. It is now valued at $100,000, but the annual dividends are only $1,500. They are both 75, and they would like to increase their retirement income. To do this, they transfer the stock to a charitable remainder annuity trust with a 5% payout rate.

In the first year, they will receive a $5,000 payment—over three times the dividends they have been receiving—and they will continue to receive $5,000 each year for the rest of their lives. Moreover, they avoid tax on their profit in the stock and receive an income-tax deduction of about $49,161. In their 24% tax bracket, this saves them approximately $11,799 in income taxes (24% of $49,161). The exact amount they can claim as a charitable deduction depends on two factors: the total amount of their charitable gifts for the year (including the deduction described here) and their adjusted gross income. 

When the last beneficiary dies, the annuity trust assets will benefit D-E.

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