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Money Matters: Charitable Remainder Annuity Trust

Money Matters: Charitable Remainder Annuity Trust

Today, we're going to talk about a CRAT, a charitable remainder annuity trust.

What a CRAT is, it is a Charitable Annuity Trust often referred to as a CRAT. It is basically an irrevocable trust set up to benefit not only myself, but a charity and effective that you do . You set up this irrevocable trust and I gift highly appreciated property to this trust. It's irrevocable okay. And what happens is, that trust pays me back an income for a term of years and it can be no longer then 20 years. So I've got a life time income not necessary a life time income up to twenty years and some day when that term ends the charity keeps the asset. And if I pass away they keep the asset.

So you see a lot of people using this for charitable giving.

It's for charitable giving but also a reduction a tax play. A lot of people are very philanthropic but also let's say I have some highly appreciated asset that doesn't derive much income. Maybe it's a stock I've had for twenty or thirty years. So I've got this stock that's highly appreciated if I sell it, I've got to pay capital gains tax, but if I donate it to this trust or charity, they can sell the asset and not pay tax and turn around and pay me income higher then I could have after tax had I have to sell it.

I'm sorry you had one word in there I wanted to question, irrevocable. Once you set this up you can't back it out?

You can not back out it is irrevocable to do that. When I pass away it goes to them. If I want to do more you can't add more to it. It's done.

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