The Charitable Remainder Annuity Trust
The annuity trust provides for payment of a fixed-dollar amount—annually or at more frequent intervals—to the designated beneficiary(ies).
The amount must equal at least 5 percent of the initial fair-market value of the trust. At the death of the last beneficiary, the trust principal is distributed to Disabled American Veterans.
In addition to the income you will receive from the trust, you will also be entitled to a charitable income-tax deduction for the value of our remainder interest in the trust assets.
For example, George and Mary Carlson purchased growth stock for $20,000 ten years ago. It is now valued at $100,000, but the annual dividends are only $1,500. Now that they are both aged 65, they would like to augment their retirement income. To do this, they transfer the stock to a charitable remainder annuity trust with a 6% payout rate.
In the first year, they will receive a $6,000 payment—four times the dividends they have been receiving—and they will continue to receive $6,000 each year for the rest of their lives. Moreover, they avoid tax on their profit in the stock, and they receive an income-tax deduction of about $28,000. In their 33% tax bracket, this saves them $9,240 in income taxes (33% of $28,000).
When the last beneficiary dies, the annuity trust assets will benefit Disabled American Veterans.
Please note: Because the federal estate tax has been repealed for 2010, there is no current estate tax in 2010 for the gifts described on this page. However, the consensus opinion among professionals is that Congress will enact an estate-tax law that may be retroactive to January 1, 2010. It is very important that you seek the advice of your estate-planning attorney to determine what changes, if any, need to be made to your existing estate plans, and then again if Congress reinstates the estate tax sometime later this year.
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