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Charitable remainder trusts are often used in estate planning to address
a desire for increased income, provide for family members, benefit from
tax savings, and support charitable organizations. You may find that such
a trust offers a good solution for your specific situation. Most importantly,
charitable remainder trusts are a proven, time-tested way to provide for
Elderhostel’s future while you satisfy personal and family financial
needs. We invite you to explore the two types of remainder trusts: charitable
remainder unitrusts and charitable remainder annuity trusts. Charitable
Remainder Unitrust
A charitable unitrust is an arrangement in which you irrevocably
place money or property with a trustee, with instructions to pay income
to one or more beneficiaries, usually for life. The income payout is
a set percentage of the trust’s assets, which are revalued annually.
When the income beneficiaries die, the property remaining (the “remainder”)
passes to the charitable remainder beneficiaries.
Donors who have appreciated real estate they no longer wish to own
often fund a charitable remainder unitrust using such real property
because of the capital gains tax savings. Cash and appreciated securities
are also commonly donated to establish a trust.
Benefits of a charitable unitrust can include:
• Income tax charitable contribution deduction
• Increased income for you and your family
• Favorable treatment of capital gains
• Reduced estate tax
Sample Charitable Tax Deduction for a $100,000*
gift to establish a 6% Unitrust
ONE INCOME BENEFICIARY |
TWO INCOME BENEFICIARIES |
Age |
Charitable
Deduction**
|
Ages |
Charitable Deduction** |
70 |
$48,283 |
70, 70 |
$36,105 |
75 |
$55,911 |
75, 75 |
$44,032 |
80 |
$63,787 |
80, 80 |
$52,691 |
*Because each
trust is a legal entity that is managed individually, charitable
trusts are usually established with gifts of $100,000 or more.
**Deductions assume IRS discount rate of 5.8%. |
Charitable Remainder Annuity Trust
Persons seeking guaranteed income who are funding their trust
with cash or appreciated securities may prefer a charitable reminder
annuity trust instead of a charitable remainder unitrust. The two are
similar; however, the annuity trust must be fully funded when the trust
is established and the annual income is fixed at that time. For example,
an annuity trust funded with $100,000, with a 6% payout rate, will pay
a fixed income of $6,000 annually to the income beneficiaries. Donors
who are seeking a reliable amount of income find the fixed payout rate
attractive.
Some supporters compare the benefits of a charitable remainder annuity
trust with a charitable gift annuity, which also provides fixed income.
To learn more about the comparative benefits and which may be more appropriate
for your situation, please contact anne.Forsyth@elderhostel.org.
Choosing Your Trustee
Elderhostel serves as trustee for both types of trust. We are
happy to consult with you and your advisor, and welcome the opportunity
to discuss with you whether the circumstances are appropriate for Elderhostel
to serve as the trustee of your trust. Many donors make arrangements
for a bank, their investment firm or another advisor to serve as the
trustee of their charitable remainder trusts.
Click here for examples of Situations
in Which a Charitable Remainder Trust is an appropriate
gift to meet financial and charitable objectives.
Please use our Planned
Giving Calculator to calculate the income and tax benefits
to which you may be entitled if you fund a charitable remainder trust
to benefit both you and Elderhostel.
To receive a complete packet of information, including calculations
personalized for your situation, please contact anne.forsyth@elderhostel.org
or call toll free (877) 737-0664.
Anne Forsyth
Sr. Planned Giving Officer
11 Avenue de Lafayette
Boston, MA 02111-1746
Toll free (877) 737-0664
As with any matter of this nature, we suggest you consult your
attorney or tax advisor. The information presented here is not intended
to be legal or tax advice.
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May 17, 2008
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