What does a CRAT do?

A CRAT is a tax exempt trust that pays income to the donor’s designee. After the trust term ends, the charity you name, e.g., the RMS receives the remainder of the assets in the trust. The year you establish the CRAT, you receive an income tax charitable deduction.

Is a CRAT a grantor trust?

A Charitable Remainder Trust (“CRT”) can be established during the lifetime of the creator of the trust (the “Grantor”) or upon the death of the Grantor. The Charitable Remainder Annuity Trust (“CRAT”) is a CRT that pays a specific amount (a fixed annuity payment) to the non-charitable beneficiary or beneficiaries.

Is a charitable remainder trust worth it?

The CRT is a good option if you want an immediate charitable deduction, but also have a need for an income stream to yourself or another person. It is also a good option if you want to establish one by will to provide for heirs, with the remainder going to charities of your choosing.

How much income can you take from a charitable remainder trust?

The income tax deduction is usually limited to 30 percent of adjusted gross income, but it can vary from 20 percent to 60 percent, depending on how the IRS defines the charity and the type of asset. If you cannot use the full deduction the first year, you can carry it forward for up to five additional years.

What’s the difference between a CRUT and a Crat?

Looney opted for a charitable remainder unitrust, or CRUT, which tied his annuity to a percentage of the fair market value of the donated assets, rather than a charitable remainder annuity trust, or CRAT, which would have set his lifetime payments at a fixed percentage of the donated assets.

How does the Charitable Remainder Trust ( CRUT ) work?

The Charitable Remainder Unitrust or CRUT pays an income stream to the taxpayer that is based on a taxpayer chosen percentage of the fair market value of the CRUT-owned assets every year.

What happens to the money in cruts and crats?

Each year, the trust is revalued. If it goes up, Looney receives more income for the coming year; if it goes down, he receives less. Upon his passing, what remains in the trust will go to the university, hence the name.

How to calculate the charitable tax deduction for a CRUT?

Charitable Deduction for a CRUT The rules for calculating the value of a remainder interest in a CRUT are in Regs. Sec. 1.664-4. Generally, the present value of the remainder interest (i.e., the charitable deduction) in a CRUT is determined by finding the present-value factor that corresponds to the trust’s adjusted payout rate.