Charitable Remainder Annuity Trust

Charitable Remainder Annuity Trust

by Richard C. Wilson & Family Offices Group Association Team

Family Office Definition: Charitable Remainder Annuity Trust

Charitable Remainder Annuity Trust definition:  (CRAT)  The beneficiary receives income from the trust for a specificied period of time (their lifetime or fixed term of less than 20 years).  The annual income withdrawn is specified as a fixed dollar amount (annuity payment) when the trust is established. The grantor is only permitted to fund the trust once and cannot make futher additions later.  When the trust expires, the remaining amount transferred to a charity must be at least 10% of the initial funded amount. The annual withdrawal must be taken regardless of the trust’s investment performance.  The gift is income tax deductible, calculated at fair market value minus the present value of the retained interest.

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