Charitable Remainder Unitrust

The charitable remainder unitrust offers donors tremendous planning power to achieve their personal goals while helping Colby. 

The charitable remainder unitrust is a tax-exempt trust that makes payments to the income beneficiaries based on a fixed percentage of the value of the trust assets as they are revalued each year. Because of this annual revaluation, the payments made to the beneficiaries will mirror the investment performance of the trust. And, because the trust is tax exempt, the potential growth of trust assets will not be slowed by taxes. Payments received by the beneficiaries will be taxed under the four-tier system of trust taxation, which effectively states that they will be taxed according to the manner in which they are received by the trust (i.e., ordinary income, capital gain, exempt income, return of principal). The donor may identify any number of income beneficiaries provided that the income tax deduction calculated at the time of the gift is made equal to at least 10 percent of the gift.

The number of variations possible with a unitrust increases its planning power. A unitrust allows for such options as the deferral of payments, funding with real estate, or establishing the trust for lives plus a term of years. The charitable remainder unitrust, therefore, is able to help the donor to turn a non-income-producing asset into an income stream capable of growing with the economy and market, to capture the gain on highly appreciated stock while avoiding the associated capital gains tax, and to achieve many other financial goals while supporting Colby.

Upon creating a charitable remainder unitrust, you may receive an income tax charitable deduction in the year the gift was made. To the extent you are unable to use all of the deduction, a five-year carry forward is available.

Colby stands ready to serve as the trustee of a charitable remainder unitrust, provided the College is irrevocable remainderman of at least 51 percent of the trust assets and provided that the payout rate of the trust is set at between 5 and 7 percent. You may, should you wish, name yourself or another person or institution to serve as trustee.

The following chart shows the income tax charitable deduction available from a 5 percent charitable remainder unitrust funded with $100,000.*

 
 Age Deduction
50 $26,552
55  $32,085
60 $38,302
65 $45,092
70 $52,513
75 $60,314
80 $67,922


 

At Colby you may establish a charitable remainder unitrust with a minimum gift of $50,000 in cash, marketable securities, real estate, privately held stock, or certain other assets.

*Calculations shown here are based on the June 2010 IRS discount rate of 3.2 percent.