How a Charitable Remainder Unitrust Works

You make a gift of an appreciated asset (or cash) to the Unitrust, which may then be sold by the Unitrust without paying capital gain tax. The sale proceeds are invested in one of our model portfolios and you will begin to receive payments for life or, if you so choose, for a term or years (not to exceed 20 years). About 75% of your payment will be taxed at capital gain tax rates or as qualified dividends under current tax law.

You are entitled to a charitable deduction for a portion of the value of the gift. If a gift of cash, the deduction may be claimed up to 60% of your adjusted gross income. Deductions for gifts of appreciated assets may be claimed up to 30% of your adjusted gross income. Unused deductions may be carried forward for up to five additional years.

When the Unitrust ends, assets remaining in the trust are distributed and used as you have designated.

Unitrust Payments

CRUT payments are a fixed percentage of the annual value of the trust assets. CRUT assets are revalued each year as of the first business day of the year, and trust payments reflect asset value increases or decreases. Investment returns in excess of the stated trust payout rates are retained in the trust, on a tax-sheltered basis, and build trust values.

About 75% of your payment will typically be taxed at capital gain tax rates or as qualified dividends.

Fees & Expenses- TBD by Administrator

Additional Details

  • There can be no binding sale agreement in place before a gift.

  • Gifts over $5,000, may require an appraisal.

  • Assets subject to debt require special planning.

Why make a gift to [Name| using a Charitable Remainder Trust?

You have accumulated an investment portfolio over a lifetime. The assets have substantially appreciated in value and worked well for you, but your financial goals are evolving. You now want a source of income without the time, effort, and complexity of managing your investments. If you sell the assets you’ll lose much of the gain to taxes.

Consider achieving your objectives with a gift to either a Charitable Remainder Unitrust or a Charitable Remainder Annuity Trust. 

The benefits of establishing a Charitable Remainder Trust

A Charitable Remainder Trust will likely help you to achieve your goals. The trust is tax-exempt, so all investment transactions within the trust are free from taxes. When you transfer appreciated assets into the trust no taxes are due. You will receive a generous income tax charitable deduction for a portion of the value of the assets. You name those individuals to receive income from the trust. You also name the charities to receive any remaining assets when the trust terminates.

In many cases you will receive more income than you are currently getting from those investments you

contribute to the trust. If you want trust distributions of a fixed amount on a set schedule (often quarterly), then a Charitable Remainder Annuity Trust is right for you. If you want the possibility—but not the guarantee—of having your trust distributions increase over time, then a Charitable Remainder Unitrust might meet your objectives.

 

How a Charitable Remainder Trust will work for you – and for [NAME OF CHARITY OR NPO]

  •  A trust agreement is prepared meeting IRS requirements for the trust to be tax-exempt.

  •  You select a trustee to administer the trust. You can be the trustee, but it is customarily a bank or investment brokerage company. Some charities will serve as trustee.

  •  You name both the individuals to receive income from the trust and the charities to receive the remaining assets when the trust terminates.

  •  You and the trustee sign the trust agreement.

  •  The trust agreement states a pay-out rate to calculate your annual distributions, typically in the 5% to 6% range.

  •  You transfer cash or appreciated assets to the trust and receive an income tax charitable deduction for a portion of the fair market value of the assets.

  •  In most cases for appreciated assets the trustee sells the assets. No capital gain taxes are due.

  •  The trustee invests the proceeds from sale to enable the trust to meet income and charitable objectives.

What is an Endowment Fund?

An endowment fund is an investment fund established by a foundation that makes consistent withdrawals from invested capital. The capital or money in endowment funds is often used by universities, nonprofit organizations, churches, and hospitals.

 

Endowment funds are typically funded by donations that are deductible for the donors and are used for specific purposes.

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