Vol. 12, No. 6, Pg. 32. Even if the Estate Tax is Repealed...It is More Blessed to Give.

Author:By Coleman L. Catoe Jr.

South Carolina Lawyer


Vol. 12, No. 6, Pg. 32.

Even if the Estate Tax is Repealed...It is More Blessed to Give

32Even if the Estate Tax is Repealed..."It is More Blessed to Give"By Coleman L. Catoe Jr.How can your client make a gift to his or her favorite charity and get lifetime income as well? It's simple. Employ a Charitable Remainder Annuity Trust (CRAT), a Charitable Remainder Unitrust (CRUT) or a Charitable Gift Annuity (CGA). These are valuable tools lawyers can use for both lifetime and death tax planning for their clients. These also meet the needs of many charitably minded older individuals who wish to make a gift to their favorite charity and receive both income tax benefits and a lifetime income stream for both themselves and their families. As an added benefit, a significant portion of the property given to charity is effectively removed from the donor's estate, thereby saving potential estate taxes.

Predictions vary, but Boston College researchers John J. Havens and Paul G. Schervish have estimated that over the next 50 years, $41 trillion will change hands from one generation to the next in the United States. Estate preparation is becoming more and more critical. These charitable instruments comprise one method that citizens with large estates will use to take advantage of estate planning.


Guidelines for Charitable Remainder Trusts come from the Internal Revenue Code, Section 664, and the attendant regulations. While Annuity trusts and Unitrusts are similar in most ways, there are some important differences. The CRAT pays at least annually an annuity amount equal to at least five percent of the initial fair market value of the trust assets. This is a fixed amount that never changes over the life of the trust. On the other hand, the CRUT pays at least annually an amount equal to at least five percent of the value of the trust assets revalued annually. This represents a variable amount that changes as the assets' value increases or decreases from year to year.

Those who select the CRAT are usually looking for a guaranteed annual payment, while those who select a CRUT are hoping to get increased earnings annually as the trust corpus grows based on good investment strategy by the trustee. Another difference between the two is that with the CRAT, no additional funds can be invested...

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