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When charitable remainder annuity trusts can be worth the risks
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With new federal guidance out this month, advisors guiding clients through charitable remainder annuity trusts have been reminded to be careful they are managing these strategies correctly and paying all taxes owed, or they will have to make disclosures to the IRS.
Processing ContentAfter a donor transfers assets to a charitable remainder annuity trust, or CRAT, at least one beneficiary can receive income for up to 20 years or for life.
Afterward, the remainder, which must be at least 10% of the original net fair market value, goes to at least one qualified U.S. charitable organization.
CRATs are a type of irrevocable trust, so assets put in such a trust can't be removed.
A CRAT case studyCharles Failla, principal and founder of Sovereign Financial Group in Stamford, Connecticut, gave an example of a client who made a sizable donation to charity, used a charitable remainder trust and took out a single-premium immediate annuity.