Under a charitable remainder annuity trust, a grantor places an asset or assets within a trust controlled by a trustee. This trust account pays out a certain amount as income to a designated beneficiary. Once the grantor passes on, the remaining assets are given to a charity of choice.
What Are the Benefits of a CRAT?
CRATs make it possible to donate money to a charity and a family member (or family members) at the same time. During a set period, the asset will give income to a beneficiary. Once the grantor passes on, the asset becomes the property of the charity.
Does a CRAT Need an EIN?
A CRAT is a type of irrevocable trust, which dissolves after the grantor dies. Because of this, a CRAT needs its own EIN. The CRAT itself is responsible for any taxes accrued by the asset, while the beneficiary will only be responsible for taxes for any income they take from the CRAT.
A CRAT is a unique and useful way to give money to charity while still providing for family members. It can be part of a high net worth estate plan.