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Charitable Remainder Unitrust

 

A charitable remainder unitrust is a gift arrangement whereby you transfer cash or other property to a trust, you retain a fixed PERCENTAGE income from the trust for life or a period of years, and pass the remaining value of the trust to charity at the end of the trust term.

How does it work?
With the assistance of your attorney, you create an irrevocable trust agreement into which you place cash or other assets. You set the terms of the trust - the length of the trust, the percentage payout from the trust, the trustee, the income beneficiary and the charitable remainder beneficiary. These terms become irrevocable upon execution of the trust agreement.

For example, Fred Mills, a retired Millsaps alumnus, decides to transfer $100,000 worth of stock to a charitable remainder unitrust and chooses to receive an 8% payout - calculated on the value of the trust each year -  for the rest of his life. Each year's income may be higher or lower than the initial payment of  $8,000 depending on the investment performance of the trust. After his death, the remaining trust assets are to be used to fund scholarships at Millsaps.

What are the benefits?

  • Income Tax Deduction: You will receive a charitable income tax deduction for a portion of what is transferred to the trust.
  • Capital Gains Tax Avoidance: If you transfer appreciated assets to the trust, the assets can be sold and reinvested without capital gains tax. As a result, 100% of the value of the asset can be invested to provide your desired income.
  • Higher Income Potential: Low yielding assets can be converted tax-free to higher yielding assets to provide a greater source of income.
  • Estate Tax Reduction: The full value of the trust is excluded from your taxable estate if you and/or your spouse are the sole income beneficiary(ies).
  • Investment Diversification: Concentrated assets can be sold tax-free and reinvested into a more diversified investment portfolio.


Who manages the trust?
A Trustee must be named to manage the trust assets. This might be a trust company, a financial advisor, trusted individual, or in some cases - you can serve as trustee of your charitable trust. The trustee must ensure that annual tax reporting is completed as well as handle the investment of the trust assets. Millsaps College does not serve as trustee of charitable trusts.

For more information contact:
Gift and Estate Planning Services
Millsaps College
P.O. Box 151191
Jackson, MS 39210-1191
(voice) 601-974-1035  (fax) 601-974-1088

DISCLAIMER: The information contained on this page is for educational purposes only.  The reader understands that Millsaps College is not rendering legal advice and that the reader should seek independent legal counsel when contemplating estate planning decisions.