Charitable Remainder Trusts

Charitable remainder trusts have become extremely popular because of the tax-planning advantages and flexibility of these life income gift plans.  A charitable remainder trust can accept the transfer of an appreciated asset, eliminate any potential tax burdens for the donor, invest the proceeds from a tax-free sale of the assets, and use the investment income to provide an income for the donor.  A charitable remainder trust may provide an income for the lifetime of the beneficiary or for a term of up to 20 years.  Minimum for a NCCF charitable trust is $100,000.

Charitable remainder unitrusts are especially advantageous for appreciated assets and real estate.  A unitrust provides a variable income based on a percentage of the value of the trust assets as determined each year.  [Example] Charitable remainder annuity trusts are excellent planning vehicles for older donors with appreciated stock.  An annuity trust pays a fixed dollar amount each year to the income beneficiary. [Example]

 Highlights

• An income stream for lifetime or a term of years.
• Attractive rate of return.
• Charitable income, gift, or estate tax savings.
• Avoidance of capital gain tax on transfer of appreciated assets.
• May be established with gift of cash, securities, real estate, cash value of life insurance policy.

For more information about charitable remainder trusts, contact us at office@nccf4christ.org or phone at 503-892-6264.  Financial and tax deduction calculations, customized gift plan proposals and counsel are available at no charge or obligation.

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Example 1 – Charitable remainder unitrust – variable payment trust

Tom and Barbara own a lot on the coast that they have owned for many years.  For many summers they would camp on the lot with their family.  They have decided to do something with the property that would provide more income to them.  They are 65 years old and recently retired.

The lot was purchased 20 years ago for $30,000 but is now worth $220,000.

They are considering a 6% unitrust to increase the potential of an increasing income stream over time and an increasing retirement income for them.

Amounts include benefit from growth of trust principal.

Trust may continue beyond 25 years since the term is the donors’ lives.

This information is provided for the planning purposes of the donor.  It is recommended that the donor review all such information with his/her legal and financial advisors.

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Example 2 – Charitable remainder annuity trust – fixed payment trust

Larry and Sue, both 74, would like more spendable cash now that they are retired.  They are considering liquidating some stock that pays no dividends and reinvesting the proceeds for additional income.  The bought the stock, now worthy $200,000, several years ago for $20,000.

If they were to sell the stock they would incur a capital gain tax of $41,400 (15% federal + 9% Oregon) on their $180,000 gain.  They would have only $158,600 to reinvest that, invested at 5.5%, would yield $8,723.00 per year.

They had planned on making a significant gift to Northwest Christian Community Foundation, but had assumed they would need to make the gift through their estate plan since they needed the income generated by their assets during their lifetime.

They decide to use their stock to create a charitable remainder annuity trust that will pay them 5.6% percent of the stocks value or $11,200 each year as long as either of them lives.  They do not have to recognize any of their $180,000 paper gain in the stock, and they get an income tax deduction of $66,704.

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