(562) 591-1292 1430 Pacific Ave., Long Beach info@lbrm.org GET HELP NOW!

Search

Charitable Remainder Trusts

Finding Security in Today’s World

j0227491.jpgA Charitable Trust can maximize your options.

There are many types of trusts being used in estate planning today. Some very unique benefits are available when you consider the use of charitable trusts as part of your financial plan.

One very popular type of trust is the Charitable Unitrust.

How a Unitrust Can Benefit You

A charitable remainder unitrust calls for the irrevocable transfer of an asset to a trust. The trust then pays you—and one other beneficiary if you desire—an income (once or more a year) for life, or a set number of years. Your income from the trust is based on a fixed percentage of the fair market value of the asset held in the trust and is valued at least annually.

The advantages of establishing a charitable remainder unitrust are numerous, including:

  • Tax Deduction ‒ You can take an immediate charitable deduction when you fund a unitrust. The amount of your deduction is based upon the age(s) of the beneficiary(ies), the percentage of income you will receive and the value of the asset placed in trust.
  • No Capital Gains Tax ‒ A unitrust lets you avoid capital gains tax on the appreciated assets placed into the unitrust and later on when the sale of those assets is made by the trustee.
  • Annual Income ‒ A unitrust provides you with a consistent income, between 5 - 8% of the trust’s fair market value.

Setting Up Your Unitrust

Several options are available to you when you establish a charitable remainder unitrust.

First, a unitrust can be set up to benefit one person—such as the donor, a spouse or a child—or it may be established for two people—the donor and another person. Second, the trust can be established for the life of the beneficiary or for a term of years determined by the donor prior to the establishment of the trust. A term-of-years unitrust has a legal maximum length of twenty years.

Funding Your Unitrust

There are many ways you can choose to fund your unitrust, including: cash, publicly traded stock, closely held stock, bonds (including tax-exempt bonds and zero coupon bonds), real estate and certain other assets.

Mr. and Mrs. Johnston, both 65 years old, own highly appreciated real estate valued at $200,000. They would like to sell the property and invest the proceeds to add to their retirement income. If the Johnstons sell their property, the Federal capital gains tax on the sale would be approximately $42,000, leaving them $158,000 or less to invest.

Instead, the Johnstons could place the $200,000 of real estate in a charitable remainder unitrust which could pay them 6%, or $12,000 income over their lifetimes. The trustee of the unitrust could sell the property with no capital gains tax due and invest the full $200,000. If the trust earns more than 6%, the extra income will be added to the principal and the 6% payments in the next year will be based on the increased value of the trust. This helps protect against the ravages of inflation.

The couple will receive an immediate income tax charitable deduction of $61,750. The deduction could be used up to 30% of adjusted gross income with a five-year carryover of any unused deduction. The $200,000 would be removed from their estate and the full gift of $200,000 would pass to Long Beach Rescue Mission Foundation, and any other organizations they have named, at the death of the surviving spouse.

The Charitable Remainder Annuity Trust

The charitable remainder annuity trust is a similar type of trust which pays the beneficiary(ies) a fixed dollar amount (at least 5% of the original value of the trust’s assets) for life. Depending on the situation, an annuity trust does not allow assets to be added to the trust and is much more rigid than a unitrust agreement.

Learning More about Charitable Trusts

If you are interested in receiving more information regarding charitable trusts and how they can benefit you in your planning goals, please contact the Ministry Support Office by calling (562) 591-1292, or simply complete and return the enclosed inquiry form. Your inquiry places you under no obligation.

Long Beach Rescue Mission Foundation
Ministry Support Office
P.O. Box 1969
Long Beach, CA 90801

Charitable Trust Inquiry Form

Click here to download the Charitable Trust Inquiry Form.


If you have questions...

If you would like more information, please contact us by calling (562) 591-1292 or or email. Your inquiry places you under no obligation.

Return to the contact page or to the Ministry Support home page.

Please note, individual financial circumstances will vary; click here to read more.