A Charitable Remainder Trust (also known as a CRUT) is a gift plan defined by federal tax law that allows you to provide a percentage payout to yourself or others while making a generous future gift to PC. The payout may continue for the lifetimes of the beneficiaries you name, a fixed term of not more than 20 years, or a combination of the two. As a CRUT donor, you irrevocably transfer assets, usually cash, securities, or real estate, to a trustee of your choice. During the term of the trust, the trustee invests the trust’s assets. Each year, the trustee distributes a fixed percentage of the current value, as revalued annually, to the non-charitable beneficiaries. If the trust value goes up from one year to the next, its payout increases proportionately. Likewise, if the trust value goes down, the amount the trust distributes is reduced. For this reason, it may be to your advantage to choose a relatively low payout percentage so that the trust assets can grow, which in turn will allow the annual payments to grow in the years to come.
A variation of the CRUT is the Charitable Remainder Annuity Trust (also known as a CRAT). The most significant difference between a CRUT and a CRAT is that the CRUT payout is variable based on an annual valuation of the trust. With a CRAT, the payout is a fixed amount that does not change.
When the term of the trust ends, the remaining trust assets pass to Presbyterian College, to be used for the purpose you designate. You may add funds to the trust during the term of the trust.
There are several benefits for you:
1. A portion of the contribution will qualify for a federal income tax charitable deduction. Note that deductions for gifts of long-term appreciated property will be limited to 30% of your adjusted gross income and gifts of cash and non-appreciated property will be limited to 50% of your adjusted gross income. You may, if necessary, take unused deductions of either kind over the next five years, subject to the same 30% or 50% limitation.
2. The income beneficiaries you name will receive annual payouts for life or for the period you designate.
3. If you fund the trust with an appreciated asset and the trust sells those assets, the capital gain will be distributed to you or the beneficiaries over time. Your payment may include dividends, interest, capital gains, and a return of principal.
4. Your estate may pay reduced estate taxes.
5. You will provide generous support of Presbyterian College.
*As with any financial decision, you should consult your CPA, attorney and other financial advisors.
For more information, please contact:
Ann Casey – Director of Advancement Services
Office: 864.833.8007 | firstname.lastname@example.org