By
Kathleen Stephenson
and Lisa Petkun
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On the other hand, charitable remainder trusts offer more advantages when the Section 7520 rate is high. Using the same example of a $1 million charitable remainder annuity trust (CRAT) having a 5 percent payout to the donor’s child for a 10-year period, with the principal then paid to charity, if the Section 7520 rate is 5.4 percent, the value of the charitable remainder at the inception of the trust is $621,305 and the present value of the child’s right to receive $50,000 a year for 10 years is $378,695 ($1 million minus $621,305). However, if the Section 7520 rate is 3.4 percent, the value of the charitable remainder drops to $582,065 and the value of the gift to the donor’s child increases to $417,935.
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Kathleen Stephenson
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