Charitable Remainder Annuity Trust (CRAT)

A Charitable Remainder Annuity Trust (CRAT) is a type of irrevocable trust designed to provide financial benefits to both the donor and a charitable organization. With a CRAT, the donor transfers assets into the trust and designates non-charitable beneficiaries, such as themselves or their family members, to receive fixed annual payments (the annuity) for a specified term or for the lifetime of one or more beneficiaries. At the end of the trust term, the remaining assets, known as the “remainder interest,” are distributed to one or more designated charitable organizations.

CRATs can offer significant tax advantages, including an immediate charitable income tax deduction based on the value of the remainder interest, potential reduction of estate taxes, and the ability to defer capital gains taxes on highly appreciated assets transferred to the trust. They are particularly appealing to individuals who wish to support a charitable cause while securing a predictable income stream for themselves or their loved ones.