Define: Charitable Remainder Annuity Trust

A CRAT is a type of irrevocable trust that provides a fixed annual income to the beneficiary, with the remainder of the trust assets going to a designated charity upon the beneficiary’s death.

The income in a CRAT is determined by a fixed percentage of the initial fair market value of the trust assets, which is paid out annually to the beneficiary.

Contributions to a CRAT are tax-deductible, and the trust itself is tax-exempt. Additionally, the beneficiary may receive a charitable income tax deduction for the present value of the remainder interest that will go to the charity.

Yes, you can name multiple beneficiaries to receive the income from the CRAT, and the trust can be structured to provide income to them in a specific order or simultaneously.

Once the CRAT is established, the designated charity cannot be changed. However, if the charity ceases to exist or changes its mission, the trust can be reformed with court approval.

In a CRAT, the fixed annual income is based on the initial fair market value of the trust assets, so any appreciation or depreciation in value will not affect the income paid to the beneficiary.

Yes, you can contribute appreciated assets to a CRAT, and you will receive a charitable income tax deduction for the full fair market value of the assets.

To establish a CRAT, you must create an irrevocable trust agreement, name a trustee to manage the trust assets, and designate a qualified charity to receive the remainder interest.

No, you cannot serve as the trustee of your own CRAT. You must appoint an independent trustee to manage the trust assets and make distributions to the beneficiary.

If the beneficiary dies before the trust term ends, the remaining trust assets will go to the designated charity, and the beneficiary’s estate will not receive any further income from the trust.