Estate Planning: Charitable Remainder Trust - T. Rowe Price

A charitable remainder trust is designed to help you make a charitable contribution today while continuing to receive an income stream from the trust assets during your lifetime. You make an irrevocable gift to the remainder trust and receive an immediate income tax deduction (subject to IRS limits). Note that you cannot take the tax deduction for the full amount of your contribution because you have elected to receive annual income from the trust. The deduction is based on various actuarial factors and will depend on the payment amount you select, your age or your chosen beneficiary's age, and the applicable IRS discount rates. Upon your death or the death of your designated beneficiary, the remaining assets in the trust become the property of the charity or charities you specified in the trust agreement.

There are two types of charitable remainder trusts:

  • Charitable remainder annuity trust: This option periodically returns a fixed dollar amount to you or your designated beneficiary determined at the time the trust is established. This may be especially attractive if you like the assurance of having a consistent, predictable income stream from the trust each year.
  • Charitable remainder unitrust: With this option, each year you receive a fixed percentage of the trust's value (as redetermined). If the trust investments grow over time, your annual income stream could grow as well, helping to maintain your purchasing power against inflation. Unlike a charitable remainder annuity trust, however, these annual payment amounts are not guaranteed, and, if the trust investments decline in value, your annual payment also would decrease.