Under both trust arrangements, you are entitled to claim a charitable income tax deduction, the amount of which will depend upon your age, the age of any other trust beneficiaries, the trust payout percentage, and other factors specified in Treasury tables. If the trust is funded with long-term appreciated assets, you may avoid capital gains on the trustee s sale of any appreciated property placed in trust.
Any income earned by the trust in excess of that stated percentage is added to the trust principal.
If the trust earnings are insufficient to meet the annuity amount, the trustee will invade the trust principal to make up the deficit. No additional contributions can be made to this type of charitable trust. Thus, the annual annuity payout will vary each year depending upon the investment performance of the trust assets. This variation makes this trust attractive to some donors because it provides a hedge against inflation. Unlike the charitable remainder annuity trust, additional contributions can be made to this trust.