| Charitable Remainder Annuity Trust |
A charitable remainder annuity trust (also known as a CRAT) is an irrevocable trust for the life of the grantor. It is similar to the CRUT, but the grantor receives an income stream in the form of an annuity for life calculated as a percentage of the principal. At death, the charity receives the remainder or the assets outright. This trust can provide great tax benefits. For example, if the assets have appreciated greatly, the grantor would incur a capital gains tax if he/she sold them. By setting up a CRAT, the grantor receives the annuity for life, avoids capital gains tax, receives an immediate tax deduction worth the present market value of the assets transferred (which can be carried forward 5 years on income tax returns), and at death the assets are NOT included in the grantor's estate, thereby avoiding federal estate tax (37% to 55%). |
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