The Nonprofit FAQ

What are the principal differences among charitable trusts?

Charitable Remainder Trusts pay an amount annually to designated beneficiary(ies) either as a fixed amount in the case of a Charitable Annuity Trust or a fixed percentage of the annually revised fair market value in the case of the Charitable Remainder Unitrust. The beneficiary(ies) may be anyone, including the grantor of the trust, and the nonprofit gets balance of the trust corpus after the trust payouts stop. Charitable Lead Trusts pay the nonprofit an amount annually either as a fixed amount in the case of a Charitable Lead Annuity Trust or a fixed percentage of the annually revised fair market value in the case of the Charitable Lead Unitrust. At the end of the trust term any beneficiary(ies) get the balance of the trust corpus. In the case of Charitable Remainder Trusts there are limitations on the term of the trust. In any of the trusts, interest rates governed by Internal Revenue Service (IRS) rules will determine, in part, the value of the gift and amount of deduction. There are other types of trusts and other arrangements which may be considered and recommended by qualified tax counsel. It is beyond the scope of this FAQ to give details beyond that discussed here. Seeking the advice of qualified tax counsel should be mandatory for any donor considering the use of such trusts or other arrangements.