Definition: A charitable remainder trust allows a donor to irrevocably transfer assets into a trust. The trust pays income to the donor or other beneficiaries during their lifetimes, and the remainder goes to a qualified nonprofit.
Charitable remainder trusts may be established during a donor's lifetime or at death. The donor usually names a bank or trust company to serve as trustee of the trust.
There are two types of charitable remainder trusts:
- Annuity Trust - the donor receives a fixed income and he/she cannot make additional contributions to the trust.
- Unitrust - this type is flexible in that the donor can make additional contributions to the trust and the payments to the donor can vary.
Examples: A charitable remainder trust is attractive to donors with highly appreciated assets.
