Charitable Income Trusts
Charitable Remainder Trusts
A charitable remainder trust allows you to transfer assets into a separately managed trust that provides beneficiaries named by you with income for life or for a specific period of years. You decide the payout of the trust in consultation with trustees who are selected by you.
The trustees have the responsibility to manage the assets of the trust, provide tax statements to the IRS and the beneficiaries, and issue beneficiary payments on a periodic basis.
Charitable Remainder Unitrust
This is an individual trust paying you a fixed percentage of the principal in the trust as it is valued annually. The rate of return must be at least five percent. As with other life income gifts, however, a higher income rate for the unitrust will generate a lower charitable deduction and will mean a smaller growth of the principal that ultimately goes to HI-USA.
Unitrust income is taxed to you based upon the trust’s investments. It may be created with, or invested in tax-exempt securities that will, in turn, provide tax-free income for you.
Charitable Remainder Annuity Trust
This is the same type of gift as the unitrust, except the income payment is a fixed-dollar amount when the gift is established.
Because the income will not vary, the annuity trust is attractive if you are seeking secure and stable future income. Also because you will not have the benefit of possible future increases in the value of the trust principal, an annuity trust generates a larger charitable deduction than a unitrust established in the same amount.
Term Trust
A unitrust or annuity trust may run for a shorter period of time that the lives of the income beneficiaries. Such trusts are known as “Term Trusts”. A Term Trust may be established to provide income to a beneficiary for a limited number of years. At the end of the term, the balance of the trust will pass to HI-USA.
Example:
Donor wants to provide tuition support for a child or grandchild and arranges for him/her to be beneficiary of a five-year term trust.
At the end of five years, the assets of the trust will pass to HI-USA to be used to fund a project of Donor’s choice. The income payments probably will have a negligible tax consequence on the young recipient, and Donor receives a very substantial charitable deduction.
If you are considering including HI-USA in your estate plans, or would like to learn more, we suggest a gift-planning consultation. Please email giving@hiusa.org.
Or telephone us or use postal mail.
