Charitable Remainder Annuity Trust

DEFINITION of 'Charitable Remainder Annuity Trust'

A type of gift transaction in which a donor contributes assets to a charitable trust which pays an annuity designed to leave a substantial proportion of the funds to charity upon termination of the annuity. The tax consequences of this transaction may be advantageous for contributing appreciated assets, due to differences involved in the taxation of charitable trusts.

BREAKING DOWN 'Charitable Remainder Annuity Trust'

The charitable remainder annuity trust is similar to other charitable annuities. However, the remainder trust has the advantage of being structured as a separate trust fund. This means that the charity cannot incur liability as a result of the annuity because the funds are in a separate legal structure.