What is a Charitable Remainder Annuity Trust?

As yet another financial and investment product, charitable remainder annuity trust is a life-income plan that is now becoming popular among interested investors. A charitable remainder annuity trust requires that all financial assets, securities, and other assets, liquid or non-liquid, be transferred into one single trust account, managed by a person designated as the trustee. The purpose of this trust fund, which is known as the charitable remainder annuity trust or CRAT is to provide continuous payments to you or to your designated beneficiaries. These continuous payments will come in fixed amounts only. You can choose whether the payments will continue until your death, or will just be for a specific number of years.

You may be wondering why this kind of trust is called charitable remainder annuity trust, and even what is very special or different about it when it sounds just like any ordinary trust account that handles and manages assets for a person. Well, the main difference will only be felt after you die, or after the trust account is terminated. In these instances, whatever is left of the investments made into the trust account will then be transferred automatically to certain charities. Now, you know why it is called a charitable remainder annuity trust.

The good thing about this is that you will hardly feel the difference anyway. Like previously described, it is just like any other trust investment, but at the same time, you know that you will someday be able to help a charitable institution. This type of trust or investment account is perfecty for people who wants to make donations to a charity, but is concerned about their financial situation as of the moment. This will help them continue to have money or income for the specific term of the contract or even throughout their entire life. This is also best for people between 60 and 80 years of age.

Another good thing about charitable annuities give you flexibility. You will be able to control several aspects of the trust because you are allowed to make your own free choices of who to designate as trustee, who to name as beneficiaries, choosing the charities to donate to, and determining how long the trust will remain in effect. You will also be able to choose from your own payout options such as the frequency of payuments and the rates.

To enter into a charitable remainder annuity trust, first, a trust document has to be prepared. The trust document will lay out into concrete terms your specific needs and whatever stipulations you still want to add. Then, after the document is finalized, you will now transfer your assets to your designated trustee, who will then sell the assets and invest the earnings. After this, you can just sit back and let the fixed income arrive in your doorstep every single month. Once the contract is terminated, the transfer of remaining funds to a charity will be automatic.

If you are interested, though, make sure that you consider the move carefully because a charitable remainder annuity trust can have big impacts on other areas of your investment portfolio.