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A charitable remainder trust is one of the most versatile tools in charitable gift planning. There are two basic types of charitable remainder trusts: the charitable remainder unitrust (unitrust) and the charitable remainder annuity trust (annuity trust). Both trusts offer the unique tax planning benefit of being tax-exempt. You can transfer appreciated property to one of these trusts, and the trust can sell the property without any recognition of capital gains taxes at the time of sale, reinvest the undiminished sale proceeds in a diversified portfolio and pay income to you for your life or for a term of years. In addition, you receive a current income tax deduction for the economic value of Benedictine’s right to receive the trust proceeds at your death. This deduction amount is based on the ages of the income beneficiaries and the amount of the payout. Because of these tax advantages, the sale and reinvestment of property within a charitable remainder trust can be a very attractive alternative to a typical outright sale of appreciated property.
Charitable Remainder Unitrust
The unitrust has become a favorite gift planning tool because of its flexibility and versatility.
Benefits of a Charitable Remainder Unitrust
- Lifetime income
- Partial income tax deduction at time of contribution
- Avoidance of capital gains taxes at contribution and sale of appreciated property
- Tax-free investment and reinvestment of trust property in a diversified portfolio
- Professional fiduciary management services
Due to the flexibility allowed in structuring the lifetime income payments, the unitrust is an excellent vehicle for contributions of less readily marketable property such as real estate, closely held stock, interests in limited liability companies and partnerships, and even tangible personal property such as valuable jewelry, coins, artwork, crops and livestock.
The two types of unitrusts generally used are the standard unitrust and the flip unitrust.