Charitable Remainder Trust Example
Description
How to fill out Charitable Remainder Unitrust?
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FAQ
The deduction is limited to the present value of the charitable organization's remainder interest. This is calculated as the value of the donated property minus the present value of the annuity.
To claim a tax-deductible donation, you must itemize on your taxes. Your donation must meet certain guidelines to qualify. The amount of charitable donations you can deduct may range from 20% to 60% of your AGI.
An Example of How It Works Susan creates a charitable remainder unitrust with annual lifetime payments to her equal to 5% of the fair market value of the trust assets as revalued annually. She funds the trust with assets valued at $500,000. Susan receives $25,000 the first year from the trust.
Jack and Joanna donate the cottage to a charitable remainder trust. The trustee sells the cottage free of any taxes since the trust is tax-exempt. The trustee reinvests the proceeds into a diversified portfolio. The Hilliers receive a current charitable income tax deduction of approximately $167,000.
In either type of CRT (unitrust or annuity trust), the Internal Revenue Service (IRS) requires that the payout rate stated in the trust cannot be less than 5 percent or more than 50 percent of the initial fair market value of the trust's assets.