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A Charitable Remainder Trust is another beneficial planned gift option. It works like this: You transfer cash, securities or other assets (including real or personal property) to the Catholic Community Foundation, who serves as trustee. The trustee invests the assets to produce income from the trust. The income is paid to you or your beneficiary for a period of years or until death. For example, with a Charitable Remainder Unitrust the annual payments are determined by multiplying a fixed percentage (at least 5%) times the fair market value of the trust assets, as revalued each year. After your or your beneficiary's death, the remaining assets are transferred to your designated charity.
When establishing a Charitable Remainder Trust, the donor receives an immediate Federal income tax deduction for the charitable remainder (the portion of the asset that is estimated to go ultimately to charity). In addition, the capital gains tax that would have been incurred through the outright sale of appreciated property is forgiven when donated to the trust. A minimum $100,000 is required to set up a Charitable Remainder Trust. This is a very attractive giving option for donors with highly appreciated assets, particularly stock or real estate. One may choose a Charitable Remainder Unitrust or a Charitable Remainder Annuity Trust.
EXAMPLE OF CHARITABLE REMAINDER UNITRUST:
A married couple, aged 66 and 59, make a gift of securities with a fair market value of $300,000 and a cost basis of $6,000. They chose a 5% pay out or, $15,000 income in the first year. They are eligible for a $93,654 Federal tax deduction (IRS discount rate 4%). The capital gains tax on $294,000 is completely avoided ($300,000 less $6,000 equals $294,000). The donors designate how the remainder is to be used upon death (such as, to establish an endowment fund to benefit the donor’s parish or other charitable organization).
If you would like to see how a Charitable Remainder Trust would work for you, we invite you to use our Gift Calculator. For more detailed illustrations, please Contact Us.
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