What is a charitable remainder annuity trust?
A. A Charitable Remainder Annuity Trust (“CRAT”) is an irrevocable trust which pays a fixed dollar amount each year to a beneficiary, such as the donor of the trust assets who creates the CRAT. The annual income could be paid to the donor and the donor’s spouse, or the donor’s children or others. After the death of the income beneficiaries, or at the end of a set number of years (up to a maximum of 20 years) the remaining assets in the trust must be distributed to the charities named in the trust. The donor is entitled to a charitable income tax deduction based on the current value of the charity’s right to receive the trust assets at some time in the future. Obviously, the longer the time during which the charity must wait, then the smaller will be the value of the charitable deduction. This value is determined with reference to an applicable federal rate mandated for federal tax purposes. In addition, the value of the interest passing to the charity at the death of the donor will esc
