There are three basic types of charitable trusts. The charitable remainder unitrust, or CRUT, is held in trust for the donor’s life (or donor and spouse). The donor receives a fixed percentage of the value of the trust each year. Upon the death of the donor, the principal amount reverts back to the charity. The annual income to the donor can vary, based on the investment performance of the principal amount in the prior year. Its cousin, the CRAT, or charitable remainder annuity trust, functions much like a charitable gift annuity, except that the principal amount is held in trust until death.
A charitable lead trust, or CLT, works in the opposite way. The donor makes a gift to the organization, which has use of the gift for a fixed number of years at which time the amount then passes back to the donor, or their heirs. At the present time, low gift tax rates make this type of trust very attractive to donors looking to transfer assets to another generation of the family.