 Helpful Articles
from David Vollrath,
Union County Foundation Executive Director
The Foundation encourages you to work closely with your professional advisor(s)
as you develop your estate plan and consider your present and future charitable goals. |
Irrevocable Charitable Remainder Unitrusts
(Part of a series of articles on charitable giving and the Union County Foundation
by David Vollrath - Exec. Dir.)
"So..how do you feel about irrevocable charitable remainder unitrusts?"
This is a question that you likely will never hear in the normal course of conversation and probably not a question
you can count on to resurrect an awkward moment of silence at a social outing. For some unknown reason glazed looks
generally follow any mention of the words trusts, charitable, and irrevocable. Combining those words is like adding
insult to injury. As a popular commercial says, it doesn’t have to be that way. Hopefully after you read this article
you no longer will automatically shift into shut-down mode when you hear or read those intimidating words, in fact
you may even be able to say "yeah, I knew that".
A charitable remainder unitrust is a method of providing lifetime income for yourself and/or loved ones, maximizing
tax benefits, and ultimately benefiting charities of your choice. In setting up a charitable remainder unitrust
the donor irrevocably (can’t take it back) transfers un-mortgaged real estate, securities, or cash to a trust that
in turn annually pays out for life (to you and a survivor) a fixed percentage of the fair market value of the donated
assets. When the life interest is complete (at the death of the beneficiaries) then the remaining assets transfer
tax free to a named charity. For example if the trust holds $100,000 of stock and the trust is a 5% unitrust, then
$5000 would be paid out to the named beneficiaries for that tax year. Each year the value of the trust assets are
determined (usually as of Jan. 1) and the fixed payout percent (in this case 5%) is applied to the valuation to
determine the payout for that year. The unitrust guarantees that you will receive the stated percentage even if
the trust’s income for the year is less than the income generated by the assets. If income exceeds the stated unitrust
% then the excess is added to the trust assets and reinvested.
Other benefits of a charitable remainder unitrust are: depending on the underlying investment of the unitrust,
portions of the annual income you receive can be taxed at the lower dividend income rate, or capital gains rate,
or may even be considered a tax free return of principal. No capital gain tax applies to the initial transfer of
assets into the trust. No capital gains tax is due when the trust sells the assets for reinvestment. Perhaps most
important of all, a charitable tax deduction on the initial assets is generated in the tax year the unitrust is
created. This charitable tax deduction can be carried forward for up to five years.
Charitable remainder unitrusts can be an important part of your estate planning and we would be happy to help you
determine if such a tool might be right for you. As is always the case we recommended a donor should work closely
with their professional advisor(s) on such issues.
The Union County Foundation encourages you to consider your present and future charitable goals. The Foundation
is equipped to help you achieve these goals by providing: planned giving and estate planning resource information,
charitable gift annuities/life income plans, and a broad array of charitable choices. Please call us at 937-642-9618,
email us, reference our website, or stop by our Marysville office at 126 N. Main St. We are committed to helping
you.... “preserve your footprint in time.” |
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