Charitable Remainder Trusts are often a very attractive way for donors with appreciated assets that produce little or no income to provide financial security in the form of an annual income and provide a meaningful charitable gift.

• Because CRT's are tax exempt,  appreciated assets (such as real estate or appreciated securities) can be sold without incurring capital gains tax. 
• Proceeds from a sale are reinvested to generate annual income for the donor or a non-charitable beneficiary. 
• At the death of the donor or the trust's beneficiary, the trust's assets are gifted to the Community Foundation.
  

There are two kinds of CRT's:

• A Charitable Remainder Annuity Trust (CRAT) makes a fixed income payment to the beneficiary each year.
• A Charitable Remainder Unitrust (CRUT) makes income payments to the beneficiary based on a percentage of the trust assets as valued each year.
  

A CRT may be set up during the donor's lifetime or established by his/her will. The eventual distribution to the Ann Arbor Area Community Foundation will take effect only at the death of all the trust's income beneficiaries.

Creating a CRT frequently allows donors to realize greater spendable income during their life time and to provide for a meaningful charitable gift  - while avoiding capital gains tax on any assets transferred to the trust.

By establishing a Charitable Remainder Trust, donors can realize many benefits:

• Donors can claim an income tax deduction in the year the gift is made with a five year carryover. A charitable tax deduction will depend upon the donor's age, the length of the trust term, payout rate, frequency of payments, and applicable federal discount rate.
• Capital gains taxes are avoided on gifts of appreciated assets.
• There is the opportunity to generate increased income for the trust's beneficiaries. Low-yielding stocks or assets that do not produce any income can be sold, with the proceeds reinvested to produce higher income.
• A donor's  estate tax liability is reduced.
• Assets can be diversified and can benefit from professional management.
• Donors can realize a degree of financial protection by providing a regular income stream while avoiding capital gains tax.
• There is the opportunity to make a meaningful gift to the community that will give forward - For good. For ever.
   

We are happy to work with donors and their professional advisors to help draft a trust document.  For more informationon establishing a Charitable Remainder Trust, please contact AAACF CFO Doug Weber.