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§ 12.1 DEFINITIONSinterests in an item of property in a CRT and/or remainder interests in an item ofproperty in a CRT, in the sense that more than one person can share the interest.Again, the income interest is the basis of payments to one or more noncharitablebeneficiaries during the period preceding the time the charity or charities 5receive the property in the trust. The remainder interest is what the charity orcharities receive upon the expiration of the income interest.Fundamentally, there are two types of CRTs: the charitable remainder annuitytrust (CRAT) and the charitable remainder unitrust (CRUT). Although there areother differences, the principal distinction between a CRAT and a CRUT is themanner in which the income interest—the amount of income to be paid out toone or more eligible beneficiaries—is computed.A CRAT has the following characteristics; it is a trust:• From which a sum certain is to be paid, not less often than annually, toone or more persons (at least one of which is not a charitable organizationand, in the case of individuals, only to an individual who is living at thetime of creation of the trust), 6• From which the sum certain is to be paid for a term of years (not in excessof 20 years) or for the life or lives of the individual or individuals,• Where the sum certain is not less than 5 percent of the initial net fair marketvalue of all property placed in the trust,• Where the sum certain is not greater than 50 percent of the initial net fairmarket value of all property placed in the trust,• From which no amount, other than the income interest payments and certainqualified gratuitous transfers, 7 may be paid to or for the use of anyperson other than a charitable organization,• Where the value of the remainder interest 8 is at least 10 percent of the initialnet fair market value of all property placed in the trust, and• Following the termination of the income interest payments, the remainderinterest in the trust is to be transferred to, or for the use of, a charitableorganization or is to be retained by the trust for a charitable use. 9Basically, a sum certain is an annuity (a fixed amount). This income interestpayment is termed the annuity amount. 10A CRUT has the following characteristics; it is a trust:• From which an amount equal to a fixed percentage of the net fair marketvalue of its assets, valued annually, is to be paid, not less often than annually,to one or more persons (at least one of which is not a charitable5 For this purpose, a charity or charitable donee is an organization described in IRC § 170(c). This classificationentails nearly all IRC § 501(c)(3) organizations and certain other donees. See § 3.3.6 A person receiving an income payment from a CRT is sometimes termed a recipient. Reg. § 1.664-1(a)(1)(iii)(d).7 See § 12.2(g)(ii).8 See § 12.10.9 IRC § 664(d)(1); Reg. § 1.664-1 (a)(1)(i).10 Reg. § 1.664-1(a)(1)(iii)(b). 407