Charitable remainder trust
A charitable remainder trust is an irrevocable trust that makes specified distributions to at least one noncharitable beneficiary for life or a term of years, with the remainder for charity. For owners of businesses, real estate and private investments, the trust has a private interest that provides a stream of payments and a charitable remainder.
How it works
A charitable remainder trust generally makes distributions at least annually. The trust agreement provides for payments to at least one noncharitable beneficiary for life or a term of years, and an irrevocable remainder for charity.
A charitable remainder annuity trust pays a sum certain of at least 5 percent of the initial net fair market value. A charitable remainder unitrust pays a fixed percentage of at least 5 percent of assets valued annually.
The IRS Trust Primer describes the private interest as a stream of payments for life or a term certain not exceeding 20 years.
Where it shows up for owners of businesses, real estate and private investments
A trust can name the donor or designated beneficiaries as recipients of a fixed annuity or a percentage payout for life or up to 20 years.
Points that are easy to confuse
Annuity trust and unitrust distributions use different payment measures. The annuity trust uses a sum certain based on the initial net fair market value, while the unitrust uses a fixed percentage of assets valued annually.
Common questions
What is the charitable remainder in a charitable remainder trust?
The charitable remainder is the irrevocable interest designated for charity after the specified distributions to at least one noncharitable beneficiary for life or a term of years.
How does a charitable remainder unitrust calculate distributions?
A charitable remainder unitrust distribution is a fixed percentage of assets valued annually, and the percentage is at least 5 percent.