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Annuity Unitrusts

Charitable Remainder Unitrust-"CRUT"

You may establish a unitrust by donating cash, securities, real estate or even personal property such as jewelry to the CRUT. You select any number of beneficiaries, although, like CRATs, it is customary to designate yourself and spouse as life income beneficiaries. The trust terminates upon the death of the last beneficiary (or at the end of a term of years up to twenty).  The remaining assets then become available to The English-Speaking Union for its general use or those purposes you stipulate in the trust agreement.

Your income is based on a payout rate - no less than 5% - that you select when you establish the trust, and on the trust's investment performance. Specifically, it is the payout rate multiplied by the fair market value of the trust as revalued annually, usually on January 1st. A young working professional might establish a 5% unitrust because he or she wants the trust principal to grow for higher income later in life. Often, a lower payout on a long-term trust will yield more cumulative income. But a retired couple might choose 7% to maximize current income.

Ward C. is 65 years old and wishes to convert some of his appreciated low-yield stock into a steady source of income: He establishes a charitable remainder unitrust with $100,000 worth of stock that originally cost $50,000 and sets the payout rate at 6%.

The trust will pay him $6,000 in the first year, and 6% of the value of the trust every year for life - no matter how the market fluctuates. He is entitled to an income tax deduction of $40,500 and avoids $7,500 in capital gains tax. Aside from those financial benefits, Ward is gratified to know that after his lifetime, his gift will support The English-Speaking Union as a legacy to his passion for its mission and programs.

Tax benefits will vary depending on the assets you donate to the trust and other factors, such as the age and number of beneficiaries. You are entitled to an income tax charitable deduction for a portion of your gift, and you may also save capital gains taxes. Trusts established through your estate reduce your estate taxes. It is often advantageous to give highly appreciated property, such as securities or real estate, as you will completely avoid the capital gains tax that would be incurred if you sold those assets. You also may consider using your tax savings to fund a life insurance trust to replace donated assets for your heirs. Your tax advisor will be able to help you decide what assets to give for maximum benefits.

Suggested Minimum: $100,000 (Cash or appreciated securities).

Age: 65