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Charitable Trusts

Two Choices

There are two general forms of charitable trust. The most common is the Charitable Remainder Trust. The second type is the Charitable Lead Trust.

Charitable Remainder Trust

With a Charitable Remainder Trust (CRT), you can receive income each year for the rest of your life from assets you give to the trust you create. Your income can be either variable or a fixed amount. After your lifetime, the balance in the trust goes to the charities of your choice. If you have read the section on Charitable Gift Annuities, a CRT may sound very similar. From the perspective of the church, they are similar. The church benefits from whatever remains within the account at time of death in both cases. The difference is that the assets in the CRT remain under the control of a Trustee (who could be the donor or not). Moreover, the beneficiary of the trust can be changed by the donor at any time before death.

A Gift Annuity instead involves transfer currently of the assets to the UUA, which then manages the funds and also guarantees a fixed monthly payment for your lifetime. There is some significant legal work in setting up a CRT, and the trust and its assets have to be actively administered by a trustee. Thus a CRT is generally advisable only when the funds involved are significant and the donor wishes to retain some control, including the ability to change the ultimate beneficiary.

There are two types of charitable remainder trusts:

  • Annuity trust: pays you, each year, the same dollar amount you choose at the start. Your payments stay the same, regardless of fluctuations in trust investments.
  • Uni-trust: pays you, each year, a variable amount based on a fixed percentage of the fair market value of the trust assets. The amount of your payments is re-determined annually. If the value of the trust increases, so do your payments. If the value decreases, however, so will your payments.

In either case, the benefits of a CRT include a partial charitable income tax deduction, avoidance of capital gains tax on appreciated assets, and the option to choose professional management of trust assets. A uni-trust structure includes a potential for increased income from asset appreciation over time.

Charitable Lead Trust

A Charitable Lead Trust (CLT) is sort of the opposite of a CRT. The CLT would pay the church (and other charitable entities) an income for a number of years, the amount and time for which you choose. When the term is up, the remaining trust assets go to your family or other beneficiaries you select. In other words, the payments initially go to the charities and the remainder goes to family or other beneficiaries. A Charitable Lead Trust can be attractive to donors who are financially comfortable enough that they can forgo investment income on some assets, yet wish to retain the assets as a bequest to family or others. As in the case of CRT’s, a lawyer and a trustee must be involved in designing and administering a CLT.

For assistance with either of these options please contact First Church Development Manager Pam Bates at (619) 398-4442.

Questions? Need help?

Please contact First Church Development Manager Pam Bates at (619) 398-4442 or online.