CHARITABLE REMAINDER TRUSTS
Annuity Trust- Donor funds a qualifying trust under Code 664, providing a fixed annuity (minimum 5% of original value of principal, maximum 50%) for one or more individuals. The trust may last for the lifetimes of the beneficiaries or a term of years (maximum 20 years). When the trust ends, principal passes to one or more qualified charities. No additional contributions permitted to trust.
Appreciated property, generally and cash. Transfers of debt-encumbered real estate disqualify trust. Unproductive, hard-to-sell assets may be unsuitable for annuity trusts if trustee is unable to make required annuity payments. No S stock.
Annuity trusts are most appealing where income beneficiaries are in their mid-70s and older and prefer the security of a fixed income. Low 7520 rates (AFR) limit deductions and payouts for annuity trusts.
Unitrust-Beneficiaries receive a fixed percentage (minimum 5%, maximum 50%) of the value of the trust assets as revalued every year (standard unitrust). Alternatively, trust may pay the lesser of the unitrust amount or the trust's actual income (a net-income unitrust); makeup provisions permitted. Additional contributions possible.
Appreciated property and cash. Transfers of debt-encumbered real estate disqualify trust. Gifts of unproductive assets may be facilitated with "flip" unitrust. Deductions for gifts of tangible personal property are reduced and postponed until assets are sold by trustee. S stock prohibited.