Charitable Remainder Trusts
 What is a Charitable Remainder Trust?
Like other life-income arrangements, a Charitable Remainder Trust (CRT) provides you and/or other beneficiaries a stream of income for life or a period of years. After the trust terminates, the accumulated principal, or "remainder interest," goes to Williams. Unlike other life-income arrangements, CRTs are separately invested and managed trusts with their own federal tax I.D. number. The minimum funding level for a CRT is $100,000. Income payments from the trust are made on a quarterly basis at the end of each calendar quarter.
The CRT Advantage: Flexibility
The most flexible life-income plan, CRTs are a powerful engine for benefiting yourself, your heirs, and Williams College at the same time. Some versions of these trusts can be funded with closely held stock, partnership interests, real estate, and, in some instances, tangible personal property such as works of art. You can tailor your CRT to suit almost any financial or estate planning goal. You can choose to receive variable or fixed income, beginning immediately, for life or a term of years (maximum term is 20 years), or you can choose to defer the bulk of the trust income until some time in the future. There is also no limitation on the number of beneficiaries of a CRT. The Office of Gift Planning can help you fashion the right CRT to achieve your goals.
What Are The Other Advantages?
- No capital gains tax liability is incurred upon placing appreciated property in a CRT.
- You receive a charitable income tax deduction in the year you make your gift, with an additional five years to carry over any unused deduction.
- You and/or your designated beneficiaries can receive income for life, or for a term of years (up to 20 years).
- Through reinvestment within the trust, you can achieve diversification of a previously concentrated asset.
- You can add to some CRTs at any time.
- Any assets you contribute to a CRT are removed from your estate, reducing your estate tax exposure.
- Williams College can act as Trustee (no management fees charged) and you can take advantage of Williams' investment management expertise.
- You will have the satisfaction of knowing that you are benefiting future generations of Williams College students.
Basic Types of CRTs
Unitrust (CRUT)
Pays a variable income based on a fixed percentage (typically between 5-6%) of the trust assets, revalued once each year. One advantage of a unitrust is that your income can increase as the trust principal grows over time. Also, you may make additional contributions at any time.
FLIP Unitrust (FLIP)
Recently approved by the IRS, the FLIP Unitrust allows you to limit income payments until a future time, such as your 65th birthday, the sale of an illiquid asset, or the time your child or grandchild enters College. At the time of such a specified event, the trust is said to "flip," and begins to pay a higher percentage of the trust assets. During the earlier period of limited income payments ("pre-flip"), the trust assets can accumulate tax free.
Annuity Trust (CRAT)
Pays a fixed annual income determined at the outset. The annuity trust is often preferred by those who are interested in the security of a constant return. Additions cannot be made to annuity trusts.
EXAMPLE (based on 5.8% IRS discount rate)
A 70-year-old alumnus in the 35% tax bracket establishes a CRUT with $200,000 of appreciated stock, originally purchased for $35,000. The donor is the sole beneficiary of the trust. The trust distributes 5% of the trust assets each year for the life of the donor. The Projected 1st year income will be $10,000. In addition, the donor will be able to claim a charitable tax deduction of $107,964.
How Do I Create A CRT?
Setting up a CRT is not particularly difficult, but donors should be advised by an attorney with expertise in the area of charitable trusts and estates. Call (413) 597-3538, email the Williams College Office of Gift Planning, or complete the personal illustration form on this website so that we can assist you through every step of the process.
CRTs require a trust agreement that outlines the terms and conditions of the trust. To save time and expense, the Office of Gift Planning can provide you with an initial draft agreement for review by you and your attorney. Once your trust agreement is signed, you can fund the trust by transferring assets to your appointed trustee.
Appreciated Securities
Bequests
Pooled Income Funds
Charitable Gift Annuities
Charitable Remainder Trusts
Charitable Lead Trusts
Real Estate
Gifts of Other Assets
How to give other assets, such as: Retirement Plans, Charitable Bargain Sales, Closely-Held Stock, Partnership Interests, Tangible Personal Property, and Life Insurance.
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