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Charitable Remainder Unitrusts
(Complete gift description)
The unitrust is an individually managed trust paying its beneficiaries – you, your spouse, family members, or other individuals – income as a fixed percentage of the trust's value as revalued annually. Here's how a unitrust works:
- The unitrust pays income to the beneficiaries for their lifetimes, or for a term of up to 20 years or for a combination of both.
- Beneficiaries receive a fixed percentage of the value of the trust's assets, as revalued annually.
- Income and appreciation in excess of that amount remainins in the trust to allow growth.
- When your unitrust terminates – at the death of the last beneficiary or at the end of the trust term – the remaining balance will be available to Yale for the use you designated when you created the trust.
What are the tax advantages of a unitrust?
- If you fund a unitrust with appreciated securities or other property, no up-front capital gains tax is payable. You can contribute appreciated but low-yielding assets and put the entire value of your gift to work generating higher income for you.
- Besides avoiding capital gains tax, you also receive a charitable deduction when you create a unitrust. Your deduction will be based on the full fair market value of the assets you contribute, reduced by the present value of your income interest. We can help you calculate the deduction amount for your planning purposes.
Planning tip – grow your gift and your income
The unitrust is designed to pay you income as a fixed percentage of gradually increasing principal. We offer an alternative version designed to hold a temporarily illiquid asset or a portfolio of growth securities for a period of time, while it pays the beneficiaries the lesser of the unitrust amount or the trust's actual net income. Called a net-income unitrust, this option is especially useful to donors who want to make a gift and secure a tax deduction now but who don't need income back immediately.
We can assist you and your advisers in considering the alternative of a net-income unitrust. Click here to see additional planning tips.
If Yale is your trustee:
The University’s experience and skills in financial management have had a positive impact on the charitable remainder trusts that we trustee. To learn more about our results click here.
How do you create a charitable remainder unitrust?
Setting up a charitable remainder unitrust is not particularly difficult, but you should be advised by an attorney with expertise in the area of charitable trusts and estate planning.
For more information
Email us, complete the personal illustration form, or call us at 1 (800) 445-6086 so that we can assist you through every step of the process.