What is it?

A CRAT pays a fixed amount to the donor or named beneficiary for a set number of years.

Who does it help?

Individuals that are charitable inclined.

Example: People who have highly appreciated assets or property and would like to receive a fixed annual payment.

Result:

At the end of the CRAT term the remaining assets are transferred to a charitable organization.

Transfer Assets to CRAT:

The Client transfers assets (usually assets which are unlikely to appreciate) to a CRAT providing for a specified distribution, at least annually, to one or more beneficiaries, including at least one non-charitable beneficiary, for life or for a fixed term of years (not to exceed 20 years). The Client designates any “qualified” charity as the remainder beneficiary (and may retain the right to change the charitable remainder beneficiary). The Client will be entitled to a Federal income, gift, and/or estate tax deduction for the present value of the charitable beneficiary’s remainder interest. The Client’s income tax deduction will be subject to percentage limitation rules. Generally, a higher income tax deduction will be available if a public charity is the remainder beneficiary than if a private foundation is the remainder beneficiary. The Client’s tax deduction must have a value equal to at least 10% of the assets transferred to the CRAT.

During CRAT Term:

A fixed amount that is at least 5% but not more than 50% of the net fair market value of the assets initially contributed to the CRAT, must be paid annually, to one or more beneficiaries (who may be the Client, his or her spouse, or one or more third persons) from the CRAT. The payout remains constant and the CRAT assets need not be revalued. In contrast to the CRUT, the Client may not contribute additional assets to the CRAT after it is established. The Client is not liable for paying capital gains tax on appreciated property sold by the CRAT.

Upon Expiration of CRAT Term:

The value of assets or property ownership passes to the Client’s designated qualified charity free of tax.