Overview
A charitable remainder trust (CRT) presents an opportunity for a donor to provide lifetime income for one or more recipients while leaving a sizeable gift to the donor’s favorite OSU program or college. This vehicle enables a donor to transfer assets to an irrevocable trust in exchange for current (or, in some cases, deferred) payments for the donor’s life, for the lives of loved ones and/or for a term of years. At the termination of the trust, the remainder is used to benefit the OSU program or entity of the donor’s choice. Charitable remainder trusts may be established during life, through a living trust, or at death through a testamentary trust. Payout percentages are usually between five and seven percent.
Types of Charitable Remainder Trusts
There are two basic kinds of remainder trusts:
1) A Charitable Remainder Unitrust (CRUT) provides the donor with a payment based on a percentage of the fair market value of the trust assets as determined annually. Therefore, the payout amount will change as the value of the trust corpus increases or decreases each year.
2) A Charitable Remainder Annuity Trust (CRAT) provides the donor with a fixed payment amount based on a percentage of the initial value of the trust. The payout on a CRAT remains constant throughout the term of the trust.
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How to Set Up Charitable Remainder Trusts
Charitable Remainder Trusts must be drafted and prepared by the donor’s own attorney. This is to avoid any conflict or perceived conflict of interest. The IRS has provided model forms to be followed when drafting charitable remainder trusts. Members of the Planned Giving Department at OSUF are on hand to assist donors and their attorneys with language and any questions that arise. OSUF is also able to serve as trustee of a charitable remainder trust, if the donor so desires.
When OSUF is serving as trustee of a charitable remainder trust, there is a small trust management fee charged. This fee is calculated annually based on the market valuation of the trust assets as of the end of the calendar year. Please see Summary of Fees.
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Term of Charitable Remainder Trusts
With respect to the term of these trusts, charitable remainder trusts are established for one or more lives, for a term of years or a combination of the two. Below are examples of some of the most common types of terms placed on charitable remainder trusts:
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Examples
 Trust for One or More Lives. A charitable remainder trust can be established to pay a fixed percentage for a life or lives. In most circumstances, the donor is the recipient of a one-life trust, while a donor and spouse typically receive income from a two-life trust. However, a donor can create a trust to benefit a child, nephew, niece, other relative or a charity (as long as there is at least one non-charitable payment recipient).
Trust for a Term of Years. A donor may create a charitable remainder trust for a term of years not exceeding 20 years. With a term of years trust, it is permissible to name a class of income recipients, such as grandchildren.
Trust for the Lesser of a Life or Term of Years. A donor may also create a charitable remainder trust for the lesser of a life or a term of years. For example, a trust created for the lesser of a term of 20 years or donor's life will terminate if the donor passes away prior to the 20 year term. Any remainder will be distributed to OSUF to benefit the program/college of the donor’s choice.
Trust for a Life Plus Term of Years. A charitable remainder trust may be created for one or two lives plus a term not exceeding 20 years. However, this is only permissible if all current and successor income recipients are living at the trust's inception, and the trust will terminate upon the earlier of the demise of all income recipients or the expiration of the term of years.
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Benefits
In general, most types of assets can be transferred to a charitable remainder trust. In particular, a charitable remainder trust is a very attractive planning tool for the disposal of highly appreciated assets, because funding a charitable remainder trust with them can avoid capital gains taxes.
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Use of the Remainder to Benefit OSU
The donor may designate how and for what purpose the remainder assets shall be used by Oklahoma State University after the termination of the charitable remainder trust. The donor may designate that the remainder be used to benefit a particular program or college at OSU. Depending on the amount remaining, the remainder could be used to establish an endowed scholarship fund to be benefit OSU students in perpetuity.
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Tip: A donor can create a charitable remainder trust through a will. A testamentary trust can be funded with any assets, including qualified retirement plan assets. The tax savings generated by the charitable estate tax deduction can be significant. (Currently it is not possible for a donor to transfer his or her qualified retirement plan during life without paying ordinary income tax on the entire plan)
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Tip: The use of an irrevocable life insurance trust in conjunction with a charitable remainder trust could replace the value of the assets used to fund the charitable remainder trust for a donor’s heirs.
Contact Us
If you have any questions about any charitable giving information or opportunities to support a specific college or program, please contact the Office of Planned Giving at (800) 622-4678 at plannedgiving@osugiving.com.
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