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A Charitable Remainder Trust (CRT) is a trust established by
the donor (or grantor) for the benefit of at least one individual,
usually the donor and/or donor’s spouse, that makes distributions
each year to the donor (or other individual(s) named by the donor)
of a portion of the income of the trust. When the person(s) receiving
the income payments dies, the amount remaining in the trust is distributed
to the Foundation to be used as previously determined by the donor.
The donor is eligible to claim a federal income tax deduction
(in accordance with IRS tables and calculations) for a portion of the
value of the gift made to establish the trust. This deduction fluctuates
based upon the income recipient’s age, the interest rate in effect at the
time of the gift and the characteristics of the trust actually written.
There are many variations on the CRT based upon how the income payments are
determined and upon the exact nature of the trust. The standard CRT is called
a Charitable Remainder Unitrust (CRUT). The trust is valued annually and the
donor receives a predetermined percentage of that value as an income payment.
Thus the payments fluctuate as the value of the trust fluctuates.
A second type of CRT is the Charitable Remainder Annuity Trust (CRAT). This
type of trust makes income payments to the donor (or other named income
beneficiary) of a set amount as determined by the donor when the CRAT is
established regardless of whether the value of the trust goes up or down in
any one year.
A third kind of CRT is the “net income CRUT” (or NICRUT) which distributes
as annual income payments a set percentage of the trust assets or whatever
it makes in income, whichever is less. This type of trust is best for
donations of real estate that, for a time, may have no income (until the
donated land is sold or developed). During that time the trust would make
no distributions (since there is no income). However, after the real estate
is sold or produces income the trust would then make distributions as a “normal” CRUT.
This third type of trust has a permutation called a net income with make-up
CRUT (NIMCRUT). This trust makes income payments to the life income beneficiary
as long as there is sufficient income but if there is not sufficient income the
trust makes reduced or no payments BUT once the trust does start to receive income
again the payments that the income recipient did NOT receive may be “Made Up” to the recipient.
The Foundation will act as Trustee for all types of charitable trusts. An administrative fee will be charged to the trust in accordance with a fee schedule adopted by the Board of Trustees. The minimum gift to establish such trusts at the Foundation is $100,000.
CRTs are not simple arrangements and should be setup with the advice of an
attorney. If not written exactly in accordance with the IRS rules surrounding
such instruments, the trust can fail and the gift will not qualify for a
charitable deduction.
If you are interested in making a gift to the university through a Charitable
Remainder Trust or wish to learn more about how they work, please contact the
UA Foundation or any of the University of Alaska Development Offices. |
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Further information about the University of Alaska Foundation Planned Giving program can be
obtained by writing to Scott Taylor, Gift Planning Manager, University of Alaska Foundation, PO Box 755080,
Fairbanks, AK 99775, by calling (907) 450-8032 or by email at scott.taylor@alaska.edu. |
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