Charitable Remainder Annuity Trust

A charitable remainder annuity trust combines the flexibility of an individually managed trust with the stability of fixed regular income.

Charitable remainder trust annuity illustration

How It Works

  • You contribute cash or securities to an irrevocable trust that pays its beneficiaries a fixed percentage of the initial value of the assets that funded the trust.  
  • Trust payments can be paid to you and your beneficiaries for life, for a term of up to 20 years, or for a combination of both.
  • When your annuity trust terminates – at the death of the last beneficiary or at the end of the trust term – the remaining balance will be distributed to the Law School Foundation.
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Benefits

  • You receive an immediate income tax deduction for the charitable portion of your contribution to the annuity trust.
  • You defer or avoid capital gains tax on any appreciated assets you contribute.
  • You or your designated income beneficiaries receive stable, predictable income for life or a term of years.
  • You have the satisfaction of making a significant gift that benefits you now and the Law School later.

Frequently Asked Questions

What are the advantages of an annuity trust?

  • You will be eligible to claim a charitable income tax deduction when you create an annuity trust. Your available deduction will be based on the full fair market value of the assets you contributed, reduced by the present value of the annuity interest you retained.
  • You will defer, or possibly avoid, capital gains tax if you fund your annuity trust with appreciated property, putting the entire value of your gift to work generating income for you.  The capital gains from those assets may be distributed to you as part of your annual trust payments in future years in accordance with a “tiered” taxation regime dictated by federal tax law.
  • Your trust payments will be reliable – as long as there are assets in the trust, you will receive the same amount every year, even if trust growth is less than your payment percentage. Your payments will not be subject to reduction (or increase) based on fluctuations in the trust value.

Is there a minimum contribution to establish a charitable remainder annuity trust?

Federal tax law does not set a specific minimum contribution required to establish a charitable remainder annuity trust. For a minimum contribution of $50,000, the Rector and Visitors of the University of Virginia can serve as trustee of your trust.

Planning Points

  • Because they pay fixed income, annuity trusts cannot accept gifts of illiquid assets like real estate. If you wish to fund a trust with illiquid assets, you may want to consider a "flip" charitable remainder unitrust.
  • Once initially funded, annuity trusts may not receive additional contributions. If you are interested in funding a charitable trust over a period of time with multiple contributions, you may wish to consider a charitable remainder unitrust.

For More Information

Email us, or call us at 877-307-0158 (toll free) or (434) 924-4154 (direct) so that we may answer your questions and help you through the process.

The materials provided in this website and the examples contained herein are for illustration purposes only and are not intended as legal or tax advice. We encourage you to consult your own legal and tax advisor.