Charitable Remainder Trust and Unitrust

Charitable Remainder Trust

The donor gifts an asset to a charitable remainder trust. The trust pays an annual income, typically to the donor, for a specified period.  For example, the period may be for the life of the donor or a fixed number of years.  When the term of the trust ends, what remains is given toUnited Way, hence the name “charitable remainder trust”. Two forms of Charitable Remainder Trust are the unitrust and the annuity trust.

 Charitable Remainder Unitrusts

A charitable remainder unitrust provides a donor with a lifetime income and a charitable income tax deduction.  The donor selects the pay out rate, usually between 5% and 7%.  The higher the pay out rate, the lower the charitable income tax deduction is. This gives the donor, and perhaps the donor's spouse, an income every year for life.  If the donor funds the unitrust with appreciated securities, the donor will avoid capital gains taxes. The donor may choose the trustee to manage the trust.  The trustee may invest in almost any investment, including tax free bonds.

Additional Resources