Reflections

There are two kinds of charitable remainder trust: the annuity trust and the unitrust.

Annuity Trust - Building an annuity trust into your estate plan means that you irrevocably transfer ownership of securities or other property to a trust for the ultimate benefit of the charity you designate. You should note that, once the annuity trust is established and funded, assets are under the management of the trustee—generally a financial institution though in some cases another qualified trustee.

The terms of the trust, however, are fashioned so that you continue to receive a fixed annual payment equal to a total value of the trust in the initial year of funding-providing a steady stream of income for you or anyone else you name. If you like you can even arrange for payments to these other individuals to continue for a specified length of time after your death. Ultimately, however the charity you’ve named in the trust document is the sole beneficiary of the assets.

How can you determine if an annuity trust makes sense for you? The following question can help you decide~

Are you interested in making a gift of securities or property to a not-fot-profit organization?

Does you investment portfolio contain assets that have appreciated significantly over time?

Would you appreciate an uncomplicated arrangement that would result in a fixed annual payment that will not fluctuate?

If you answered yes to any of the question above, an annuity trust could make an important difference in the effectiveness of your current financial strategy and estate plan.

Here’s how:

Funding the trust with highly appreciated assets enable you to bypass capital gains tax on the sale of these securities. This is because they have been transferred to a trust that is exempt from paying this tax. In a situation where the value of the securities has increased to a large degree, this could amount to substantial savings.

In addition, for the year you fund the trust, within certain limits you are able to take a charitable deduction on your federal income tax return for the value of the securities that not-for-profit group ultimately will receive. Again, this aspect of an annuity trust can represent and important tax advantage.

Lastly, an annuity trust is a straightforward arrangement: you can depend on a steady income in amounts that do not change over time.

 

 

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