The Charitable Remainder Unitrust

The unitrust provides for annual payments to the designated beneficiary(ies) of a specified percentage—at least 5 percent of the value of the trust as it is valued each year. Since the value of trust assets may vary from year to year, the payments may also vary. At the death of the last income beneficiary, the trust principal is distributed to .

In addition to the income you will receive from the trust, you will also be entitled to a charitable income-tax deduction for the value of our remainder interest in the trust assets.

For example, George and Mary Carlson purchased growth stock for $20,000 ten years ago. It is now valued at $100,000, but the annual dividends are only $1,500. Now that they are both aged 65, they would like to augment their retirement income. To do this, they transfer the stock to a charitable remainder unitrust with a 6 percent payout rate.

In the first year, they will receive a $6,000 payment—four times the dividends they have been receiving—and those payments will increase in time if the assets of the unitrust appreciate in value. Moreover, they avoid tax on their profit in the stock, and they receive an income-tax deduction of about $29,000. In their 33 percent tax bracket, this saves them $9,570 in income taxes (33 percent of $29,000).

When the last beneficiary dies, the unitrust assets will benefit any program you choose.

Please note: Because the federal estate tax has been repealed for 2010, there is no current estate tax in 2010 for the gifts described on this page. However, the consensus opinion among professionals is that Congress will enact an estate-tax law that may be retroactive to January 1, 2010. It is very important that you seek the advice of your estate-planning attorney to determine what changes, if any, need to be made to your existing estate plans, and then again if Congress reinstates the estate tax sometime later this year.
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