CHARITABLE REMAINDER TRUSTS
A charitable remainder trust is a personal management plan that provides both a lifetime income and a charitable income tax deduction to the donor. The donor selects the payout rate, usually between 5-7 percent, which gives the donor, and perhaps the donor's spouse or other beneficiary, an income every year for life. McLean receives the remainder of the trust at its termination and it may be designated to benefit a particular department or program at McLean or it may be unrestricted.
There are two types of charitable remainder trusts: the annuity trust and the unitrust. The minimum amount to fund either type of trust is $100,000.
The charitable remainder annuity trust pays a fixed, guaranteed dollar amount, regardless of the trust's investment performance. The income rate is determined at the time the trust is funded. The annuity trust is best for donors who seek a regular, fixed income and prefer to have the satisfaction of knowing the exact amount of the payment in advance. No additional gifts may be added to an annuity trust.
The charitable remainder unitrust pays the donor a predetermined percentage of the fair market value of the trust's assets as reevaluated annually. If the trust's assets increase, the donor receives a larger payment providing a hedge against inflation. Additional contributions may be made to a unitrust.
Summary of financial benefits:
- Lifetime income stream - payments can be fixed or variable, depending on the type of trust
- Charitable income tax deduction for a portion of the gift
- Avoidance of capital gains taxes on the transfer of long-term appreciated property
- Possible estate tax benefits