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Annuity trusts refer to trusts in which the trustee pays a certain sum annually to the beneficiaries for their respective lives or for a certain term of years. Upon the death of the last living individual beneficiary or upon the expiration of the term of years the trustee must either transfer the remainder to or for the use of a qualified charity or retain the remainder for such a use. The sum paid to the beneficiaries must not be less than 5% of the initial fair market value of the property transferred to the trust by the donor. A qualified annuity trust must comply with the requirements of Internal Revenue Code.
Charitable remainder annuity trust, Charitable Remainder unit trust, Grantor retained annuity trusts are few examples of annuity trusts.