What is Charitable Remainder Annuity Trust?
A charitable remainder annuity trust, or CRAT, is a trust that is established to provide annual disbursements to a beneficiary. In most situations, the trust is initially funded with a mix of assets such as cash, bonds, stocks, and other securities. This type of life income plan normally specifies a specific dollar amount that may be disbursed in each twelve month period and usually has to be at least five percent of current value of the trust. It is possible to set up a charitable remainder annuity trust as a way to plan for the retirement years. For example, the donor transfers a variety of assets into the trust. Each year, a fixed payment is issued to the donor. Upon the death of the donor, any assets remaining in the trust are transferred to a charity previously designated by the donor. The charitable remainder annuity trust can be structured to allow all assets placed in the trust to generate annual income for a specified beneficiary even before the death of the donor. Instead of
