Under the sample provision, the CRAT
will terminate early on the date immediately before the date of an annuity payment that, if made, would reduce the trust corpus value (multiplied by a specified discount factor) to less than 10% of its initial value.
The trust sells the property for cash, then distributes income generated by the sale to the couple for a term of years or for life -- the amount and duration determined by the couple at the time they create the CRAT
-- free of capital gains tax.
A charitable remainder unitrust (CRUT) is similar to a CRAT
, but with a few important differences.
provides a stream of variable annuity payments to the grantor or other noncharitable beneficiary for a term of years or for one or more lives, with remainder to a charity.
can also be an effective way to provide a benefit (i.
provides for a guaranteed fixed-income payment based on the value of the assets at the time they are initially transferred.
If immediate supplemental income is desired from the trust, CRAT
or CRUT options provide for either fixed-payment or fixed-percentage distributions on an annual basis.
Administrative costs for a CRAT
are more burdensome than for a CGA, since the charity is required to file certain annual returns such as Form 5227, Split Interest Trust Information Return, and Form 1041-A, U.
The Act revises Code [sections] 664 to prohibit CRATS and CRUTS from having a maximum payout rate in excess of 50 percent of the trust asset's fair market value.
Since a unitrust permits additions and payouts varying with the trust's value, it generally is considered more flexible than a CRAT
THE DONOR'S CHARITABLE CON1 RIBU I ION FOR funding a charitable remainder annuity trust (CRAT
) is the value of the property placed in the CRAT
less the present value of the CRAT
's annuity payments.
As with the CRAT
, the lower Section 7520 rates reduce the value of the remainder interest available for the charity.