Charitable Remainder Trusts

Marty Wolf describes her passion for music and the New York Philharmonic.  Read a donor's testimonial

Caroline Holt, a long-time music lover of the New York Philharmonic  Read a donor's testimonial

Charitable remainder trusts (CRTs) are gift arrangements that enable you to contribute to the New York Philharmonic while providing lifetime income or income for a fixed number of years for you and/or someone important to you. Charitable remainder trusts can be tailored to your assets, income requirements, and financial objectives. Upon termination of the trust, the principal is distributed to the Philharmonic.

You should consult with your professional financial and legal advisors for a thorough analysis of the possible consequences in creating a charitable remainder trust.

Important Financial Benefits

With a charitable remainder trust, you may:

• Significantly increase your spendable income
• Receive an income tax deduction for your gift
• Reduce your estate taxes

The lower the percentage payout chosen and the older the income beneficiaries, the larger the deduction. Should you fund the trust with appreciated assets, you avoid the capital gains tax. Above all, you have the satisfaction of making a more significant contribution to the Philharmonic than might otherwise be possible.

How a CRT Works
To establish a CRT, you make an irrevocable contribution of cash, securities, or other property to the trust. You select one or more individuals, a bank, or a trust company to serve as trustee. The trustee invests the assets and manages the CRT as a separate account. Each commercial trustee has its own fee schedule and minimum funding requirement, both of which you should consider in funding your trust.

There are two types of charitable remainder trusts: the annuity trust and the unitrust. The main difference between them is the manner in which the income payments are set.

•  Annuity Trust
  A charitable remainder annuity trust provides a fixed dollar payment. When you set up the annuity trust, you determine the payout rate - which, by law, must be at least five percent of the initial fair market value of the trust. You may not add assets to an annuity trust.
• Unitrust
  A charitable remainder unitrust provides a variable income payment. When you set up the unitrust, you determine the fixed annual payout rate (not below 5 percent). Every year (generally January 1), the fair market value of the trust's assets are revalued. Distributions will vary in relation to the changing market value of the revalued assets in the trust. You may add assets to a unitrust. If the principal grows over time, the great advantage of the unitrust is that distributions grow as well.

CRT's Can Pay Income for a Term of Years
You may set up a CRT for a term of years, which in many cases entitles you to a larger income tax charitable deduction than a CRT with a lifetime income. After the term of years, the CRT terminates and the New York Philharmonic receives the principal.

If the charitable remainder interest were valued at less than 10% of your total contribution to the CRT, it would be necessary to limit the CRT to a term of 20 years or fewer.

A term of years may also be appropriate for someone who, because of other sources of income or terminal illness, will not need distributions from the CRT for his/her life expectancy.

A CRT for the Younger Donor
For younger donors, the primary benefit of a CRT is likely to be the diversification of assets and an increased rate of return without incurring a capital gains tax. The income tax charitable deduction would be relatively small.

If a younger donor limited the CRT to a term of years, the charitable income tax deduction may increase.

For an example of how a CRT would work for your circumstances, please contact:

Marilyn J. Liebowitz
Director of Major and Planned Gifts
New York Philharmonic
10 Lincoln Center Plaza
New York, NY 10023
Tel: (212) 875-5696
Fax: (212) 875-5716
E-mail: liebowitzm@nyphil.org