Which trust makes payments to the donor that are recalculated each year based on the trust’s assets?

Which trust makes payments to the donor that are recalculated each year based on the trust’s assets?

• A. Charitable remainder annuity trust
• B. Charitable remainder unitrust
• C. Testamentary trust
• D. Clifford trust

Answer: (B)

Payments that are recalculated each year based on the trust’s assets describe a charitable remainder unitrust. In a unitrust, the income paid to the donor is a fixed percentage of the trust’s value, as determined by valuing the assets annually. Because the trust’s assets are revalued each year, the actual dollar amount of the payment can go up or down with market performance. This distinguishes it from a charitable remainder annuity trust, which pays a fixed dollar amount each year regardless of how the trust’s value changes. A testamentary trust is simply one created by a will and isn’t defined by this payment mechanism, and the Clifford trust is not a standard form of CRT.

Payments that are recalculated each year based on the trust’s assets describe a charitable remainder unitrust. In a unitrust, the income paid to the donor is a fixed percentage of the trust’s value, as determined by valuing the assets annually. Because the trust’s assets are revalued each year, the actual dollar amount of the payment can go up or down with market performance. This distinguishes it from a charitable remainder annuity trust, which pays a fixed dollar amount each year regardless of how the trust’s value changes. A testamentary trust is simply one created by a will and isn’t defined by this payment mechanism, and the Clifford trust is not a standard form of CRT.