The two basic forms of CRTs are the charitable remainder annuity trust (CRAT) and the charitable remainder unitrust (CRUT). The major difference between the two forms is the nature of the income payments you receive.
A CRAT pays income at a fixed amount per year, based on the value of the initial funding assets. For this reason, it enables you to secure a fixed dollar amount of lifetime income while avoiding market risks. So, for example, if the value of your initial funds is $100,000, and we determine your rate to be six percent, you would receive $6,000 (six percent of $100,000) every year for the rest of your life.
The payout from a CRUT, on the other hand, is variable. A unitrust pays a fixed percentage of the annually redetermined value of the trust assets. Because the assets are revalued annually, there is potential either for growth or decline in dollar payments. Using the above example again, you would still receive $6,000 the first year. The trust would then be revalued each year. If the value of the assets grows to $104,000, your income for that year will be six percent of the new value, or $6,240. If the trust assets go down in value, your income will be less than $6,000.
Another difference between the annuity trust and the unitrust is that after the initial funding, you may add supplemental funds to a CRUT but not to a CRAT.
How Do You Choose Between a CRAT and a CRUT?
A primary factor in choosing between the two basic forms is the age of the income recipient(s). Older grantor-recipients tend to favor the certainty of the annuity trust, while younger persons favor the growth potential of a unitrust to offset inflation.
Other considerations can be the risk tolerance of a grantor-recipient, the nature of other income sources, and economic expectations.
Drafting a proper trust arrangement to satisfy your wishes, protect your family and you assets, and save taxes can be complicated and requires the skill of a knowledgeable attorney or financial advisor. We would be happy to work with you and your advisor to help you determine how a trust or other deferred gift can meet your needs. All discussions are strictly confidential and, of course, at no obligation to you.
Paoli Hospital Ways to Give
255 West Lancaster Avenue
Paoli, PA 19301
For more information, call 1.866.CALL.MLH.