Charitable Remainder Unitrust

The charitable remainder unitrust provides annual payments of a specified percentage (at least 5 percent of the value of the trust as it is valued each year) to at least one designated beneficiary. Because the value of trust assets will likely vary from year to year, the payments will also vary. At the death of the last income beneficiary, the trust principal will be distributed to the UW Foundation.

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 10 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 receive an income-tax deduction of about $27,400. In their 24% tax bracket, this saves them more than $6,575 in income taxes (24 percent of $27,400).

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

Charitable Remainder Unitrust Diagram

How it Works

  1. Create a trust agreement outlining the terms of the trust.
  2. Transfer cash or other property to trustee.
  3. The trustee invests and manages the trust assets.
  4. The trustee makes payments to the income beneficiaries.
  5. The remainder goes to the UW Foundation for purposes you specify.

Benefits

  • Income to one or more beneficiaries that will vary annually with the value of the trust
  • Federal income-tax deduction for the charitable-remainder value of your gift
  • No capital-gain tax when the trust property is sold
  • The trust remainder will provide generous support for the UW Foundation

*Please consult with a tax advisor if interested in these options.