|
Planned
Giving
Charitable
Remainder Trusts
A
Charitable Remainder Trust is established for the life of
the donor (also trustor or grantor) and/or for the life
of any beneficiary(-ies) and is irrevocable. Once established,
it cannot be changed. If it is desired, the income period
of the trust can be established for a specified period of
time not to exceed twenty years.  The
twenty-year maximum does not apply if the trust life is
based on the life expectancy of the income beneficiary(-ies).
Because
the income is paid to one or more parties and, at the end
of the trust's life, the principal and any undistributed
interest is paid to a different party, a charitable remainder
trust is called a split interest trust. The income portion
of the trust may be either an annuity income or a unitrust
income.
An
annuity income is calculated at the time the trust is established
in the trust agreement. It is a fixed amount of dollars
based on the then market value of the trust. If the assets
of the trust go up in value, the income portion does not
change.
With
a unitrust, the assets of the trust are revalued annually
and the percentage rate established in the trust agreement
determines the dollar amount of the unitrust interest. If
the value of the principal in the unitrust declined, the
value of the interest portion of the unitrust would decline
as well. The unitrust interest value would increase if the
value of the trust assets increased.
A
charitable remainder trust is an attractive planning tool
for the disposal of highly appreciated assets. While the
assets revert to the charity rather than the heirs of the
estate, the use of an irrevocable life insurance trust in
conjunction with a charitable remainder trust could replace
the asset's value for the heirs.
Net
Income Charitable Remainder Trust
This variation of a unitrust provides that either the specified
fixed percentage of the trust assets or the net income of
the trust is distributed to the beneficiary, whichever is
less. This type of trust is often used to handle real estate
as there is no fixed distribution requirement, giving the
trustee time to arrange an orderly sale of the property.
A net income charitable remainder unitrust can be an excellent
way to donate appreciated property and turn it into an income
stream as well as acquire tax benefits.
A
donor may also add a "makeup provision" to the
trust. This allows a trust to distribute more than the fixed
percentage of the assets in years where the trust's income
exceeded the fixed percentage. In this manner, previous
years shortages, when the trust was not able to earn the
fixed percentage payment, may be made up.
Flip
Charitable Remainder Unitrust
A flip unitrust blends two types of trusts for greater
flexibility, both for the donor and the eventual remainderman.
The trust functions as a net income trust until a specified
event occurs. On January 1st following the specified event,
the net income trust flips and becomes a standard unitrust.
This type of trust functions well for illiquid assets such
as real estate or assets that are hard to value. Click here
for more information on flip
unitrusts.
Return
to the Charitable Remainder Trust
story.
Please
note, individual financial circumstances will vary. The
information on this site does not constitute legal or tax
advice. Donor stories and photographs are for purposes of
illustration only. As with all tax and estate planning,
please consult your attorney or estate specialist. All material
is copyrighted and is for viewing purposes only. Use of
this site signifies your agreement with the terms
of use. The content in this Planned Giving section has
been developed for Sisters of Notre Dame de Namur, Ohio
Province by Future
Focus. Please report any problems to section
webmaster. Revised: February 6, 2007 21:31.
©1999-2006,
Sisters of Notre Dame de Namur, Ohio Province 701 East Columbia
Avenue, Cincinnati, OH 45215-3999 513-761-7636 | 513-761-6159
FAX
Send
comments on this Web Site to Web
Weaver. This page was updated: February 6, 2007 21:31
|
HOME