A Charitable Remainder Trust is a gift that pays you an annual income for a term of years or for your lifetime and/or other beneficiaries. At the time of your passing, Young Life would receive the remainder of the assets in the trust. This is ideal if you own some type of appreciated asset paying little in the way of a dividend. By placing this asset into the trust and naming Young Life as the final beneficiary of the trust, you could receive the following:

• An annual income from the trust, usually 5 to 7 percent of the asset value.
• Avoidance of the capital gains tax on an appreciated asset such as stocks or real property.
• A partial charitable tax deduction.
• Removal of assets from the estate for tax purposes if the estate is taxable.
• A charitable gift to Young Life larger than you may have thought possible.

Two Types of Remainder Trusts

1. Charitable Remainder Annuity Trust (CRAT)
   This type of trust pays a fixed percentage annual income on the value of the assets used to fund the trust. This valuation of assets happens at the time the trust is established and never changes. Example: A $100,000 gift is placed in trust and is paying a 6 percent annual income. The annual payment is always $6,000 a year.
   
2. Charitable Remainder Unitrust (CRUT)
   This type of trust pays a fixed percentage annual income based on the value of the assets used to fund the trust as determined by an annual valuation of the assets in the trust. This means that, if the value of the assets in the trust increases over time, so does your annual payment. The percentage never changes, but the value of the trust may increase, thereby increasing the income from the trust. Example: A $100,000 gift is placed in a trust and is paying a 6 percent annual income. The first year the payment is $6,000. At the beginning of the second year the $100,000 used to fund the trust has grown to $110,000. The annual payment is now 6 percent of $110,000 or $6,600. Please note that the value of the trust can increase or decrease over time.

Example

Mr. Smith creates an annuity trust with stock he has held for a number of years. While the stock has grown in value over the years, Mr. Smith would like to increase the income he receives from the stock above the small annual 1 percent dividend payment. The original cost of the stock (cost basis) is $50,000. The stock is now worth $100,000. Mr. Smith decides he wants to receive a 5 percent annual payment for a term of 20 years.

• Increased annual income from $1,000 a year in dividend payments to $5,000 a year annuity payments, totaling $100,000 over 20 years.
• Bypass the capital gains tax (up to 20 percent) on the $50,000 appreciation of the stock for a tax savings of up to $10,000.
• Receive a charitable tax deduction of approximately $47,000 (assumes a 28 percent tax bracket) for a tax savings of approximately $13,000.
• An eventual gift to Young Life of approximately $284,000 (assumes a 9 percent annual growth of the trust assets).