Guide to Giving

The Charitable Remainder Unitrust

Diagram

< Life-Income Gifts

You create a trust, and income from the trust goes to the beneficiaries you specify. Beneficiaries receive income for life or for a specified number of years, and at the end of the trust term, the assets of the trust will benefit any IU program you choose.

For example, George and Mary Carlson purchased growth stock for $20,000 ten years ago. It is now valued at $100,000, but the annual dividends are only $1,500. Now that they are both aged 65, they would like to augment their retirement income. To do this, they transfer the stock to a charitable remainder unitrust with a 6% payout rate.

In the first year, they will receive a $6,000 payment—four times the dividends they have been receiving—and those payments will increase in time if the assets of the unitrust appreciate in value. Moreover, they avoid tax on their profit in the stock, and they receive an income-tax deduction of $28,875. In their 33% tax bracket, this saves them $9,529 in income taxes (33% of $28,875).

When the last beneficiary dies, the unitrust assets will benefit any IU program you choose.


Please note: Because the federal estate tax has been repealed for 2010, there is no current estate tax in 2010 for the gifts described on this page. However, the consensus opinion among professionals is that Congress will enact an estate-tax law that may be retroactive to January 1, 2010. It is very important that you seek the advice of your estate-planning attorney to determine what changes, if any, need to be made to your existing estate plans, and then again if Congress reinstates the estate tax sometime later this year.
Read more