The annuity trust is attractive to donors seeking secure and stable future income because its income will not vary. An annuity trust will also generate a larger charitable deduction than a unitrust established in the same amount, because the donor will not have the benefit of possible future increases in the value of the trust principal.

A donor establishing either a unitrust or annuity trust may elect for the payments to the person or persons who benefit from the trust to be for either the life or lives of the person or persons the donor chooses to receive payments from the trust or for a period of years, not to exceed 20 years. Trusts established for a period of years are known as "Term Trusts." A term trust may be established to provide income to a beneficiary for a limited number of years (not to exceed 20 years). At the end of the term, the balance of the trust will pass to a Masonic charity.

For example, if the donor wants to provide tuition support for a child or grandchild, it may be wise to make him or her the beneficiary of a five-year-term trust for the period of attendance at college. At the end of the five years, the assets of the trust will pass to a Masonic charity. The income payments will probably have a negligible tax consequence on the young recipient, and the donor will receive a very substantial charitable deduction.

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