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A charitable remainder trust is established through a trust agreement drafted by the donor's attorney. The donor than irrevocably transfers assets to fund the trust. Low-yielding, appreciated assets are typically used to establish charitable remainder trusts because the donor can oftentimes avoid the capital gains tax, increase their annual income, and receive an immediate charitable income tax deduction. The formal trust agreement must meet specific requirements and set forth the terms of the trust including the agreed upon payout rate. The two most common charitable remainder trusts are the charitable remainder unitrust and the charitable remainder annuity trust.
Income payments may be either fixed or variable based on the type of trust, the agreed upon payout rate, and the value of the trust assets. These income payments can be made to the donor and/or another individual such as a spouse or relative. Upon the death of the life income beneficiaries or a specific number of years (not to exceed twenty), the remainder of the trust assets are paid to the Archdiocese of Milwaukee or another archdiocesan beneficiary.
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