What’s the difference between a Charitable Gift Annuity and a Charitable Remainder Trust.

Following is a high-level overview showcasing the distinctions between to important philanthropic tools, the Charitable Gift Annuity (CGA) and a Charitable Remainder Trust (CRT). The distinctions go much deeper than is outlined below, but we hope this quick overview will give you a idea about which tool you wish to explore more deeply.


Nature of the Gift:
With a CGA, you make a gift to a charity (typically a lump sum of cash or securities) in exchange for fixed annuity payments for life. The charity becomes the annuity provider.

In a CRT, you transfer assets (cash, real estate, securities) into an irrevocable trust. The trust pays income to you or your chosen beneficiaries, and the remaining assets go to charity after a specified term or upon your death.


Timing of Charitable Benefit:
CGA: The charitable benefit is immediate, because the gift used to set-up the CGA goes to the a charity.

CRT: The charitable benefit is deferred, as it occurs upon the termination of the trust.


Income Structure:
CGA: Provides fixed, regular annuity payments determined at the time of the gift.

CRT: Offers flexible income payments, which may vary based on trust assets.


Tax Benefits:
CGA: Offers an immediate charitable income tax deduction. Depending on the asset used to fund the CGA portion of the annuity payments may be tax-free and/or reflect preferential treatmean of capital gains tax.

CRT: Provides a charitable income tax deduction when funded, and the capital gains tax is spread out if the trust sells appreciated assets. Tax-free income distributions may be possible, but rare.


Flexibility:
CGA: Limited flexibility, as annuity payments are fixed and unchangeable.

CRT: Greater flexibility to choose how the trust assets are invested and adjust income payments within IRS limits. Some CRTs also allow additions to them.


Charitable Control:
CGA: The charity has control and ownership of the gift assets upon receipt.

CRT: You (or your chosen trustee) have some influence over how the trust assets are invested and managed.


Despite the differences, both the CGA and CRT options offer unique benefits and may be suitable depending on your financial and philanthropic goals. Consult with a financial advisor or estate planner to determine which option aligns best with your objectives. Of course, Charitable Giving Alliance team is happy to help .