Charitable Remainder Trust

When a donor establishes a trust funded with cash or appreciated property, managed by a designated trustee, which provides annual income to the donor (and beneficiary) during his/her lifetime, this is called a Charitable Remainder Trust. After that time, the property is distributed to the UNA Foundation. Tax deduction is received the year gift is made and an estate tax charitable deduction later.

Charitable Remainder Unitrust

Trust annually pays to a named beneficiary or beneficiaries a specified percentage of the fair market value of the trust's assets which are re-valued annually. Law requires that the specified payout cannot be less than 5%. Donor can make additional gifts to trust without setting up additional trust instruments.

Example: John and Mary, ages 70 and 68 respectively, have 1,000 shares of securities that were acquired years ago for $10 per share. Today the stock is $100 per share (for a total value of $100,000). Dividends are $3,000 annually. If they sell the stock, they then must pay federal capital gains taxes of 28% of $90,000. Instead, John and Mary create a Unitrust, and the trustee pays 6% once a year at the end of each year on the trust principal, as re-valued annually, for the remainder of their lives. Donor receives a charitable deduction of $36,987 and avoids capital gains taxes, avoids estate taxes, and doubles income.

Charitable Remainder Annuity Trust

The amount of the annual payment to the beneficiary (ies) does not change over the life of the trust. The donor cannot make additional contributions. The amount of the income tax charitable deduction is in large part dependent on the interest rate used by tax tables for the month in which the trust is created.

Example: Returning to John and Mary in the above example, if they instead establish a charitable remainder annuity trust, John and Mary will have the security of knowing they will receive fixed annual income of $6,000.00 for the rest of their lives.