If you've built a sizable estate and are looking for ways to receive reliable income payments, consider a charitable remainder trust (CRT).
CRTs may offer you tax benefits and the option for income. There are two ways to receive payments, each with its own benefits:
The 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.
The unitrust pays you each year a variable amount, based on a fixed percentage of the fair market value of the trust assets. Your payment amount is redetermined annually. If the value of the trust increases, so do your payments. If the value decreases, your payments will as well.
An Example of How It Works
Lucille, 75, wants to make a gift to the House but would also like more income in the future. Lucille creates a charitable remainder unitrust with annual lifetime payments to her equal to 5% of the fair market value of the trust assets as revalued annually. She funds the trust with assets valued at $500,000.
Lucille receives $25,000 the first year from the trust. Subsequent payment amounts vary each year depending on the annual valuations of the trust assets. She is eligible for a federal income tax charitable deduction of $301,905* in the year she creates and funds the trust. This deduction saves Lucille $96,610 in her 32% tax bracket.
*Based on a 3.6% charitable midterm federal rate. Deductions and calculations will vary depending on your personal circumstances.