Charitable Remainder Trusts are trusts whereby the donors and named beneficiaries are to receive, during their lifetime, quarterly distributions equal to a percentage of the fair market value of the fund determined at the beginning of the year.  Upon their deaths, the principal and income of the fund may be used to establish funds within the Foundation.

A charitable remainder trust pays to the donor (and/or another beneficiary) either a fixed or variable income for the beneficiary’s life, or for a fixed term not to exceed twenty (20) years, or a combination of the two. When the trust term expires, the remainder is then distributed to a charitable beneficiary.

Charitable remainder trusts offer a great deal of flexibility. Payments can be made to the donor for life and then can be directed to a spouse or another beneficiary after the donor’s death. A charitable remainder trust can be set up during one’s lifetime or may be established by a will.

Charitable remainder trusts do not pay ordinary income tax. The income distributed to individuals is taxable to the income recipients. The principal is held for charitable purposes. If donors place highly appreciated securities in the trust, the trustee can sell them without having to pay the capital gains tax realized on the profits of the sale. Low-yielding stocks can be sold and the proceeds reinvested to produce higher income for the income beneficiary.

By creating a charitable remainder trust, the donor can enjoy a number of benefits, including professional management of the assets in the trust and a degree of financial protection. In addition, the donor can receive a charitable income tax deduction depending on their age, length of the trust term, payout rate, frequency of payments, and applicable federal discount rate. Creating one of these trusts frequently enables donors to realize greater spendable income.

The Scranton Area Foundation may serve as trustee of a charitable remainder trust or as the beneficiary. Choosing the Foundation as the beneficiary gives the donor increased flexibility on the use of the charitable remainder.