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By David Vollrath, Executive Director Union County Foundation In recent months we have seen quite a bit of interest surrounding the use of charitable remainder unitrusts. A charitable remainder unitrust (CRUT) is an effective way to support charitable causes while providing lifetime income and tax savings. The person who establishes the trust selects the unitrust % (payout), names the persons to receive income from the trust, and names the charities which will receive the remainder of the trust assets after all income payments are completed. The main benefits of a CRUT are that capital gains taxes are bypassed, income may be increased, and a substantial charitable deduction is generated. Here’s how it works: Lets say John & Mary Smith both age 65 own property that is suitable for development. The Smith’s have always planned on selling the property someday to fund part of their retirement. The Smith’s are very involved in local charities and the Smith’s children are grown and financially independent. Retirement is now upon the Smiths and the timing is right to sell the property. The Smith’s originally bought the property over 35 years ago for only $5000. Now the property is worth $200,000. If the Smith’s sell the property for the $200,000 market value they will pay capital gains taxes on $195,000. That tax alone is over $29,000. If the Smith’s instead form a CRUT they can bypass much of the capital gain and still draw a minimum of 5% of the trust value each year as income. In this case if the net proceeds (after legal fees etc.) from selling the property are $195000 then the Smith’s could receive a minimum of $9750 this year. Every year during their lifetime the Smiths would receive 5% of the trust’s value (usually based on the value as of Jan. 1 each year). If the trust value grows over time the 5% annual payout will also grow. In addition to this income the Smith’s would receive a charitable tax deduction of over $72000 in the initial year of the trust. That deduction could be carried forward for five years. If the trust grows at a 7% rate the projected payout to charity (after a projected 26.2 year lifespan) would be in excess of $327,000. As you can see there are potentially some real benefits to this type of tax and estate planning. We at the Foundation see these and other charitable instruments work effectively for many people over a broad range of circumstances. If you have a charitable inclination there most likely is a charitable tool that can work effectively to meet your goals. A charitable remainder unitrust (CRUT) is but one example. The Union County Foundation is equipped to help you achieve your charitable goals by providing: planned giving and estate planning resource information, charitable gift annuities/life income plans, and a broad array of charitable choices including establishment of scholarship funds and donor advised funds. 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. Please call us at 937-642-9618, email info@unioncountyfoundation.org, reference our website at www.unioncountyfoundation.org, 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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