Planned Giving

Charitable Remainder Annuity Trust

A charitable remainder annuity trust is a gift arrangement whereby you transfer cash or other property to a trust, you retain a fixed DOLLAR income from the trust for life or a period of years, and pass the remaining value of the trust to charity at the end of the trust term.

With the assistance of your attorney, you create an irrevocable trust agreement into which you place cash or other assets. You set the terms of the trust - the length of the trust, the percentage payout from the trust, the trustee, the income beneficiary and the charitable remainder beneficiary. These terms become irrevocable upon execution of the trust agreement.

For example, Fred Mills, a retired Millsaps alumnus, decides to transfer $100,000 worth of stock to a charitable remainder annuity trust and chooses to receive $8,000 per year (an 8% payout) from the trust for the rest of his life. After his death, the remaining trust assets are to be used to fund scholarships at Millsaps.

• Income Tax Deduction: You will receive a charitable income tax deduction for a portion of what is transferred to the trust.

• Capital Gains Tax Avoidance: If you transfer appreciated assets to the trust, the assets can be sold and reinvested without capital gains tax. As a result, 100% of the value of the asset can be invested to provide your desired income.
  
  
• Higher Income Potential: Low yielding assets can be converted tax-free to higher yielding assets to provide a greater source of income.
  
  
• Estate Tax Reduction: The full value of the trust is excluded from your taxable estate if you and/or your spouse are the sole income beneficiary(ies).
  
  
• Investment Diversification: Concentrated assets can be sold tax-free and reinvested into a more diversified investment portfolio.

A Trustee must be named to manage the trust assets. This might be a trust company, a financial advisor, trusted individual, or in some cases - you can serve as trustee of your charitable trust. The trustee must ensure that annual tax reporting is completed as well as handle the investment of the trust assets. Millsaps College does not serve as trustee of charitable trusts.