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Charitable Remainder Trusts
What is a Charitable Remainder Trust?
Like other life-income arrangements, a Charitable Remainder Trust (CRT) provides you and/or other beneficiaries you name a stream of income for life or a period of years. After the trust terminates, the accumulated principal or "remainder interest" goes to World Vision. Unlike other life-income arrangements, CRTs are separately invested and managed trusts with their own federal tax I.D. number.
 The CRT Advantage: Flexibility
The most flexible life-income plan, CRTs are a powerful engine for benefiting yourself, your heirs, and World Vision at the same time. Some versions of these trusts can be funded with closely held stock, partnership interests, real estate, and, in some instances, tangible personal property such as works of art. You can tailor your CRT to suit almost any financial or estate planning goal. You can choose to receive variable or fixed income beginning immediately for life or a term of years, or you can choose to defer income to some time in the future. If you are relatively young and insurable, you can even use some of the increased income or tax savings produced by your plan to purchase a second-to-die life insurance policy that replaces your gift and flows to your heirs outside of your estate (this is called "wealth replacement").
What Are The Other Advantages?
- You greatly reduce capital gains liability on any appreciated assets that you contribute to a CRT.
- You receive a charitable income tax deduction in the year you make your gift, with an additional five years to carry over any unused deduction.
- You and/or your designated beneficiaries can receive income for life, or for any term of years you specify up to 20.
- You can add to the unitrust version of a CRT at any time.
- Any assets you contribute to a CRT are removed from your estate, reducing your estate tax liability.
- Through reinvestment within the trust, you can achieve diversification of a previously concentrated asset.
- You can gain the advantage of your chosen trustee's professional investment management expertise for your trust.
Basic Types of CRTs
Unitrust (CRUT)
One advantage of a unitrust is that your income can increase as the trust principal grows over time. Also, you may make additional contributions at any time.
Annuity Trust (CRAT)
Pays a fixed annual income determined at the outset. The annuity trust is often preferred by those who are interested in the security of a constant return. Additions cannot be made to annuity trusts.
FLIP Unitrust (FLIP)
Recently approved by the IRS, the FLIP Unitrust allows you to defer or limit income payments until a future time, such as your 65th birthday or the sale of an illiquid asset, when the trust "flips" and begins to pay a percentage of the assets re-valued annually. Meanwhile, the trust assets can accumulate tax-free.
EXAMPLE (based on 6.2% IRS discount rate)
A 73-year-old donor in the 31% tax bracket establishes a CRUT with $200,000 of appreciated stock, originally purchased for $35,000. Trust pays donor 6% of the trust assets re-valued each year for life. Trust earns a 10% average total return.
| Trust principal |
$200,000 |
| Charitable Income tax deduction* |
$105,825 |
| Income tax savings (31%) |
$32,800
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| Capital Gains Tax avoided (20%) |
$33,000 |
| Income (Year 1) |
$12,000 |
| Projected income payments to donor |
$191,084 |
| Projected benefit to World Vision |
$305,447 |
How Do I Create A CRT?
Setting up a CRT is not particularly difficult, but donors should be advised by an attorney with expertise in the area of charitable trusts and estates. Email the World Vision Gift Planning Department, or complete the personal illustration form so that we can assist you through every step of the process. CRTs require a trust agreement that outlines the terms and conditions of the trust. To save time and expense, the Gift Planning Department can provide you with an initial draft agreement for review by you and your attorney. Once your trust agreement is signed, you can "fund" the trust by transferring assets to your appointed trustee.
Appreciated Securities
Bequests
Continuous Child Care Sponsorship Agreement
Pooled Income Funds
Charitable Gift Annuities
Charitable Remainder Trusts
Charitable Lead Trusts
Retained Life Estates
Charitable Bargain Sales
Charitable Vision Fund (a Donor Advised Fund)
Advisor-Managed Donor Advised Fund
Gifts of Other Assets
How to give other assets, such as: Retirement Plans, Real Estate, Closely-Held Stock, Partnership Interests, Tangible Personal Property, and Life Insurance.
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