Charitable remainder trusts provide income payments before passing remaining assets to charity.

You may find that while there is slightly more effort and expense involved in setting up a trust, it can be an extremely useful and flexible way to:

• Reduce income taxes.

• Convert appreciated assets into a lifetime income stream.

• Bypass the capital gains tax.

• Benefit Timothy Two and other personally meaningful charities.

• Make a gift now or in your will.

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It works like this:

• You transfer money or property to the irrevocable trust (often non-producing appreciated property held for over one year), removing the property from your estate.

• You pay no capital gains tax on the transfer.

• You qualify for an immediate income tax deduction (if you itemize) for our estimated remainder interest.

• You name the income beneficiaries—yourself, your spouse, or anyone you choose.

• The trustee manages the assets and pays out an income for life or for a set number of years (up to 20) to you and/or other named beneficiaries. Income payments typically equal 5% of the trust value, but you can set the amount within legal limits.

• At the end of the trust term, the trust pays out the remaining assets to us (or other named charitable beneficiaries).

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Comparing a CRAT and a CRUT

As noted above, there are two main types of charitable remainder trusts—a charitable remainder annuity trust (CRAT) and a charitable remainder unitrust (CRUT). There are two main differences:

• Income payments. A CRAT offers a fixed payment that is a percentage of the initial assets in the trust. This provides a steady, reliable income stream and can be a good way to lock in a high interest rate. A CRUT offers a variable payment amount that is a percentage of the trust assets as revalued annually. This serves as a hedge against inflation.

• Flexibility. A CRAT comes in just one form and cannot accept additional contributions. A CRUT is more flexible—it comes in four different types and can accept additional contributions.

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A CRT may be a particularly good option to consider if you want to:

• Make a major gift and gain immediate income tax benefits, all without a loss of spendable income.

• Make a significant property gift but don’t want to lose the income produced by the asset.

• Convert an appreciated asset into an income stream.

Older donors interested in the steady income of a charitable remainder annuity trust should compare the trust with a charitable gift annuity, which may be able to provide higher income payments.

If you want to provide for your family and us after your death, a CRUT you create in your will (often called a “give it twice” trust) is worth considering. A “give it twice” trust, officially known as a testamentary CRUT, lets you provide for your family after your death and then support our important mission. It works like this:

• You include provisions in your will to create and fund the CRUT (many people fund the trust by simply naming the trust as the beneficiary of their retirement accounts).

• When you die, the selected assets will go into the trust and your spouse, children, or other named beneficiaries will receive payments for life (or a period up to 20 years).

At the end of the trust term, the remaining trust assets will be distributed to us to help perpetuate our work around the globe.