Updated July 22, 2015
Charitable Trust Chicago Illinois
Charitable Remainder Trusts exist whenever there is a noncharitable income beneficiary of a trust. The gifts of remainder interests will qualify for a charitable contribution deduction only if the trust is a charitable remainder annuity trust (CRAT) or a charitable remainder unitrust (CRUT).
An annuity trust is a trust from which a sum certain of a specified amount is to be paid to the income beneficiary or beneficiaries. The specified amount cannot be less than five percent, and no more than fifty percent of the initial net fair market value of all property placed in trust. Also, it must be paid at least annually to the income beneficiary.
A unitrust is a trust which specifies that the income beneficiary or beneficiaries are to receive annual payments based upon a fixed percentage of the net fair market value of the trust’s assets as determined each year. The fixed percentage cannot be less than five percent or more than fifty percent of the net fair market value of the trusts assets for the year. For this purpose, trust income excludes capital gains, and trust assets must be valued annually.
CRAT’s and CRUT’s cannot have noncharitable remainder interests. Generally, the remainder interests must pass to a charity upon the termination of the last income interest, and the trust instrument must contain a provision that determines how this final payment is to be made.
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Chris Amundson is the President of Accounting Solutions Ltd., a full service public accounting firm of Certified Public Accountants and Enrolled Agents handling the bookkeeping, accounting, tax preparation, and audit representation needs of Businesses, Estates, Trusts, and Upper Income Individuals.