Planning for the future—for you and your community.
Giving through a Charitable Remainder Trust allows you to receive income for the rest of your life, knowing that whatever remains will benefit your community.
You transfer assets into a trust, and the trust pays you or a beneficiary you designate regular income payments. Upon the beneficiary’s death or after a defined period of years, the remaining assets in the trust transfer to the community foundation.
You may choose to receive a fixed income or one that changes with market conditions—income from the Charitable Remainder Trust you establish may add up to more than interest and dividends you earned from holding the assets. You can use it to supplement your own lifestyle or that of someone other than yourself: a sibling, a dependent parent, a friend, or a former employee. You can start receiving annuity payments immediately, or defer them to increase your charitable income tax deduction.
A portion of the income may be a tax-free return of principal, while some is taxed as ordinary income or capital gains. The amount of annuity paid and the tax deduction received depends on the age of the recipient and the current annuity rate (as established by the Internal Revenue Service).
You can pick one of these options for your Charitable Remainder Trust:
- Annuity trust pays you a fixed dollar amount.
- Standard unitrust pays you an amount equal to a fixed percentage of the net fair market of the trust and is recalculated annually.
- Net income unitrust pays you the lesser of the fixed percentage specified by the trust agreement or actual trust income; some net income unitrusts allow you to make up deficiencies in past years.
- Flip unitrust is a net income unitrust that converts to a standard unitrust upon a triggering event, such as the sale of an asset used to fund the trust.
Example Donor Story
A gift that pays.
James Assad was retired and in his late seventies. The stocks he owned had high market values, but they paid limited dividends. In addition to increasing his personal income, James was interested in giving to the community in which he had lived his entire life, so he decided to transfer the securities to a Charitable Remainder Trust that eventually would create a fund with his local community foundation. “The income I received from the trust is more than what I was collecting in annual dividends—by thousands of dollars. If I would have sold the stocks, I’d have paid a fortune in capital gains tax,” says James. James also receives an immediate charitable tax deduction and pays less tax on trust distributions. “Plus,” he says, “I know that when I pass, I’ve done something good.” In time, James’ gift will create the Assad Family Unrestricted Fund to address ever-changing community needs.
There is so much more we’d like you to know. For more information and ideas on ways to integrate your financial planning with charitable giving, ask your financial advisor or contact Tami Wenning at email@example.com.