Charitable remainder trust allows a grantor to create a trust that generates revenue for a few years and then transfers the assets to a charity. These types of trusts are popular because they allow the grantor to still generate income while receiving tax benefits after creating the trust. The trust gives the grantor or another chosen beneficiary income yearly until the trust’s period ends, and the trust is irrevocable, meaning that the grantor can not change the trust. Charitable remainder annuity trusts (CRAT) distribute the income based on a fixed percentage every year and end after the person dies. Charitable remainder unitrusts (CRUT) allow the income to be made based on a percentage of the assets which can vary based on the performance of the trust for a specific amount of years, and CRUTs allow the grantor to contribute more into the trust after its creation, unlike CRATs.
Compare to: Charitable Lead Trust
[Last updated in November of 2021 by the Wex Definitions Team]