Can Charitable Annuity Trusts Be Amended?

by Cindy Quarters

A charitable trust typically is created so that a person is able to control what happens to her assets after she dies without the assets having to be probated, while still providing her with financial benefits for the duration of her life. Charitable trusts can take a number of different forms. The most common of these provides an annual payment to the donor or a named individual, although other kinds of charitable trusts also exist.

Charitable Trust Basics

A charitable remainder trust, often just called a charitable trust, is a type of trust that pays an annuity to the donor, depending on the specifics of the trust. Charitable trusts are typically established when a person wishes to make a donation to a charity, usually quite large, but does not want everything to go to the charity while she is alive. The donor can establish a trust that provides her with either a fixed or a variable income.

Annuity Trust

With a charitable annuity trust, the donor receives regular payments of a fixed amount annually, based on the value of the assets in the trust at the time it is established. After the donor dies, the balance of the trust goes to the designated charity, although it is possible for the trust to have another beneficiary who will receive the annual payments. In this case, the charity only gets the trust after all of the named beneficiaries have died. This type of trust cannot be altered or amended once it has been set up.

Unitrust

A charitable "unitrust" is nearly the same as a charitable annuity trust, except that the unitrust is set up so the donor’s payout is a percentage of the value of the trust at the time of the payout. This means the donor’s annual income may vary. Ideally, the annual income will increase, but that depends on the assets in the trust and current market conditions. Like the annuity trust, once in place, no changes can be made to this type of trust.

Considerations

The charitable annuity trust is an ideal solution for a person who wishes to donate assets to a charity after she dies but wants to be sure she has a guaranteed stream of income while alive. The donor is guaranteed this outcome because the fixed payments are established and the trust is valued at the time it is created. The charitable unitrust is more appropriate for a person with assets likely to increase in value during the donor's life. Assets that increase significantly over the life of the trust will cause the annual payments to go up as well.

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