If you have built a sizable estate and also are looking for ways to receive reliable payments, consider a charitable remainder trust. This type of trust provides you or other named individuals income each year for life or a period not exceeding 20 years from assets you give to the trust you create. At the end of the trust term, the balance in the trust goes to the Texas Alpha Endowment Fund. Designate a portion of a trust to Texas Alpha Endowment Fund by transferring assets through a charitable remainder trust, and you or a beneficiary earn income.
How does a charitable remainder trust work?
Charitable remainder trusts allow you to irrevocably transfer assets, and you and/or your beneficiaries receive payments from the trust for life, or another time period of your choice. The remainder of the trust then goes to a nonprofit like Texas Alpha Endowment Fund.
What types of charitable remainder trusts (CRT) are there?
- a charitable remainder annuity trust (CRAT) pays a fixed dollar amount to income beneficiaries for life or a term of years, regardless of market conditions. The CRAT cannot accept additional gifts after it has been established.
- a charitable remainder unitrust (CRUT) pays the income beneficiaries a fixed percentage rate for life or a term of years. The annual income amount is based on the current value of the trust’s assets, so the payout will increase or decrease based on changes in the trust’s value.
An Example of
How a Charitable Remainder
Trust Works
Frank, 75, wants to make a gift to the Texas Alpha Endowment Fund but would also like more income in the future. Frank creates a charitable remainder unitrust with annual lifetime payments to him equal to 5% of the fair market value of the trust assets as revalued annually. He funds the trust with assets valued at $500,000.
Frank receives $25,000 the first year from the trust. Subsequent payment amounts vary each year depending on the annual valuations of the trust assets. He is eligible for a federal income tax charitable deduction of $301,905* in the year he creates and funds the trust. This deduction saves Frank $96,610 in his 32% tax bracket.
*Based on a 3.6% charitable midterm federal rate. Deductions and calculations will vary depending on your personal circumstances.
Please always confer with your legal and/or tax advisor for more information and to determine if a bequest to/for Texas Alpha Endowment Fund is right for you.