Charitable Remainder Trust

Put your trust in Cornell's future

Read more about a new giving option that allows you to invest your charitable remainder trust in Cornell's endowment.

The Charitable Remainder Trust is one of the most popular, versatile and time-tested planning techniques involving charitable giving. A Charitable Remainder Trust allows you to contribute to Cornell while retaining an income for life or a term of years.

What is a Charitable Remainder Trust?

You transfer property to a trust either in life or through your Will with Cornell University generally serving as trustee. Cornell investment managers invest, manage and distribute the assets in accordance with the terms of the trust document, including payments to you or your designee every three months. At the end of the trust term, the remaining assets are distributed in accordance with your stated charitable wishes. Cornell will serve as trustee for a minimum gift of $50,000. Multiple charitable beneficiaries may be named in the trust document as long as Cornell’s portion is at least 50% and exceeds $50,000.

There are two basic types of charitable remainder trusts, a charitable remainder unitrust (CRUT) and a charitable remainder annuity trust (CRAT).

• In a CRUT the income beneficiary is entitled to receive a fixed percentage of the fair market value of the trust assets as revalued annually. Thus, the income payment will increase as the value of the assets increase. Conversely, the income payment will decrease if the value of the trust assets decreases. Additional gifts are permitted without creating a new trust.
• In a CRAT, the income payments are set at the inception of the trust. The payments due not fluctuate and have no correlation with the future value of the trust assets. Additional gifts require creation of a new trust.

As a general rule, your tolerance for market risk is the primary factor in selecting a CRAT or CRUT. Historically the CRUT has been the more popular because it allows income to potentially increase with inflation.

What are the Benefits of a Charitable Remainder Trust?

A charitable remainder trust allows you to provide income for yourself, your spouse, your children or another beneficiary, while helping to meet important objectives:

• Increase your income. Also, CRTs provide great flexibility in managing the income tax treatment of the payments you receive from the trust.
• Obtain a significant income tax charitable deduction.
• Unlock appreciated assets (cash, securities, real estate, business interests, etc.) without incurring a capital gain tax.
• Remove assets and future appreciation from your taxable estate.
• Diversify your portfolio with minimum tax costs.
• Supplement your retirement income with the potential for long-term income growth.
• Secure investment and administrative management through Cornell University with no fee.
• Retain flexibility in the timing of income distributions.
• Establish legacy support for Cornell. Your gift is credited based on the fair market value of the property transferred to the trust, allowing you to reach charitable goals that on the surface appear unobtainable.

For example

Situation:

• $100,000 of GE stock with cost basis of $20,000 paying a 1% dividend
• GE stock transferred to 6% Payout Cornell CRT
• Donors are husband and wife age 72 and 70

Result:

• $80,000 capital gain avoided, saving $12,000 in taxes paid at 15% tax rate
• $37,500 income tax charitable deduction generated, saving $15,000 in taxes paid at 40% combined Federal and State tax rate
• First year income is 600% of prior dividend income.
• Receive $137,000 in payments over lifetime assuming 8% return on trust assets

The results in this example may vary based on time of gift and other factors.

How Can Cornell Be of Assistance?

We are charitable planning specialists and have resources available to fully support both your investigation and implementation of gift planning techniques, such as charitable remainder trusts. Our services are professional, confidential, collaborative and provided without cost or obligation. We encourage you to will call on us to assist you, your family and advisors in exploring financial, estate and charitable planning.

• Charitable Remainder Trusts (pdf)
• Investment Strategies at Cornell for Charitable Remainder Trusts (pdf)