What is a Charitable Remainder Trust?
Charitable remainder trusts are tax-free trusts that pay you – as well as other possible designated beneficiaries – an annual distribution, often in quarterly installments. The annual distribution from a charitable remainder trust can be a percentage of the annual value of the trust’s principal (unitrust) or a percentage of the initial funding amount of the trust (annuity trust). The payment can be for life or for a term of years (e.g., 10 years).
The payout percentage of the trust must be at least 5% and can go higher as long as the charitable deduction does not drop below 10% of the amount transferred. The payouts of most Harvard-managed trusts range from 5% to 6.5%.
When you fund a charitable remainder trust, you will receive a charitable income tax deduction for a portion of the funding amount, typically 30% to 40% of the amount you transfer.
How Do Charitable Remainder Trusts Work?
The minimum funding amount for a Harvard-managed charitable remainder trust is $150,000, and the minimum age for an income beneficiary is 50 years old.
If you choose Harvard as the trustee of your trust, Harvard will provide the trust document and numerical illustrations for you to review with your advisors. The trust document establishes the terms of the trust, including whether the annual distribution is varied or fixed, what percentage is paid out, to whom the distributions are paid, and how the trust’s remainder will be utilized by Harvard Law School at the end of the trust term. Harvard does not charge a trustee fee and Harvard Management Company does not charge investment management fees, so your trust can be managed efficiently and at a reduced cost.
The gift calculator below will allow you to test out different charitable remainder trust scenarios. Click on “Personalize This Diagram” to fill in your gift hypotheticals, including property type, beneficiaries, and gift term, then click “Submit” to see the results.
For any questions about charitable remainder trusts, making a planned gift to Harvard Law School, or about any of the related tax benefits, please contact:
Charlize Suzanne Gordy
Director, Planned Giving