You may establish an annuity trust to meet many financial needs, such as retirement or college education for your children or grandchildren. An annuity trust produces a larger initial income tax deduction than a unitrust does. However, additional gifts can't be made to an annuity trust once it is established. While many types of assets can be used to establish an annuity trust, most donors find a gift of highly appreciated, low-yeilding securities to be most advantageous. Because the trust's obligation to make income payments begins immediately, real estate is not usually an appropriate method of funding such a trust.
Any income earned by the trust that exceeds the annuity is added to the trust principal.
If trust earnings are insufficient to meet the annuity payment, the principal is used to make up the deficit. If you'd like to receive a personalized illustration of how a charitable remainder unitrust can work for you, please fill out our electronic form, and one will be sent to you. Martin W. '59 would like to make a significant gift to Colby to establish an endowment to support Colby's Music Department. The capital gains involved have kept Martin from selling all or part of the stock in order to increase the income available to help his mother.