Gift Planning

Flip Unitrust

This variation of a unitrust provides the flexibility necessary for some assets by combining aspects of a net income unitrust and a regular unitrust. It is an excellent approach for people with illiquid or unmarketable assets to fund a trust that will make an irrevocable commitment to their favorite charity (or charities).

At the onset, the trust does not have to pay any income to the trust beneficiary (or beneficiaries). After a predetermined event, such as the sale of the asset funding the trust, the Flip unitrust "flips" (becomes) a standard unitrust on the following January 1st. Since the asset in this case has been sold, the trustee has cash to invest in income-producing assets for the trust and may begin making regular income payments to the beneficiary (ies).

A flip trust provides flexibility for donors with hard to value or illiquid assets. A flip trust can be managed so that illiquid assets may be sold in a tax advantaged manner, the proceeds reinvested in a balanced portfolio and life income payments received by the donor and/or other beneficiaries.

There are many different types of events that can trigger the flip. The event cannot be discretionary and must be specified in the trust documents. Examples of some events that could be used to trigger a flip are:

• A single event
• Birth, death, marriage, or divorce
• The sale of all or a specified part of an illiquid asset
• A person reaching a certain age
• A specific date