The annual payment is based on a fixed percentage of the fair market value of the trust assets at the time the trust is created. The minimum percentage allowed by law is 5 percent and most trusts are established between 5 percent and 7 percent.
The payment from an annuity trust will be the same each year. Payment may be ordinary income, capital-gain income, tax-exempt income or tax-free income, depending on the particular circumstances of the unitrust.
You can create a charitable remainder annuity trust during your lifetime or at death through your will. The minimum amount necessary for such a trust with the American Baptist Foundation is $30,000.
An example of a Charitable Remainder Annuity Trust
Mr. and Mrs. Back, ages 72 and 70, transfer appreciated long-term securities valued at $100,000 to the American Baptist Foundation to establish a charitable remainder annuity trust. Their cost basis in the stock was $30,000. They want a 7 percent payout.
They will receive $7,000 each year ($100,000 x 7 percent). They will also receive a charitable deduction for their income tax of $35,889 and avoid all the capital gains tax on the $70,000 of long-term gain.
At the death of the last survivor, the remainder of the trust will go to the causes of the church they have designated. For example, the remainder could establish a permanent fund with the American Baptist Foundation, the income from which could be sent to their congregation undesignated, or designated for the specific causes they want to name.