More about Charitable Remainder Annuity Trusts
A charitable remainder annuity trust is a separately invested and managed charitable trust that pays you, and/or other beneficiaries, a fixed annuity for life or for a term of years. You receive a charitable income-tax deduction for a portion of the value of the assets you place in the trust. By law no additional gifts to the trust are permitted once the trust is initially funded. After the annuity trust terminates the balance or "remainder interest" goes to Mercy Foundation North to be used as you designated when you created the trust.
What is the difference between an annuity trust and unitrust?
The charitable remainder unitrust pays out a fixed percentage of the trust's assets, and revalued each year. As a result, your payments will fluctuate with the trust's performance. For this reason, charitable annuity trusts can't accept gifts of illiquid assets, invest solely for growth, or pay out net income only. The charitable income-tax deduction for an annuity trust is usually higher than that for a unitrust, because the unitrust is likely to pay out more income to the beneficiaries over time. More information about the charitable remainder unitrust.
Planning tips — consider these ideas to benefit yourself and Mercy Foundation North
- Retirement Planning: Increase your retirement income by contributing low-yielding securities to a charitable annuity trust. The trust will sell the securities and reinvest the total amount, paying you a minimum of 5 percent of the trust's original value annually.
- Education Trust: Create a trust for a term of years, using the income to fund a loved one's education. At the end of the term, the remainder passes to Mercy Foundation North to use where you have designated.
- Special Needs Trust: Your charitable annuity trust can pay a separate plan set aside to meet a qualified disability need.
- Parents' Trust: If you're providing annual income to parents, consider establishing a trust that pays income to them. You receive a charitable deduction at the time of funding and help both Mercy Foundation North and your family.
How do you create an annuity trust?
You should be advised by an attorney or other advisor with expertise in charitable trusts and estate planning. Mercy Foundation North will work with your advisors to help meet your financial and philanthropic goals. If you do not have an attorney, Mercy Foundation North can provide a referral. Once your trust agreement is signed, you can fund your annuity trust by transferring assets to your trustee.
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