Charitable Remainder Trust

SOLUTIONS FOR LARGE DONATIONS

If you have built a sizable estate and also are looking for ways to receive reliable payments, consider a charitable remainder trust. This type of gift may offer you tax benefits and the option for income. There are two ways to receive payments and each has its own benefits:

The annuity trust pays you each year, the same dollar amount you choose at the start. Your payments stay the same regardless of fluctuations in trust investments.

The unitrust pays you each year, a variable amount based on a fixed percentage of the fair market value of the trust assets. The amount of your payments is redetermined annually. If the value of the trust increases, so do your payments. If the value decreases, however, so will your payments.

AN EXAMPLE OF HOW IT WORKS
Susan, 75, wants to make a gift to Birmingham Landmarks but would also like more income in the future. She creates a charitable remainder unitrust with annual lifetime payments to her equal to 6 percent of the fair market value of the trust assets as revalued annually. She funds the trust with assets valued at $500,000.

Susan receives $30,000 the first year from the trust. Subsequent payment amounts vary each year depending on the annual valuations of the trust assets. She is eligible for a federal income tax charitable deduction of $276,880* in the year she creates and funds the trust. This deduction saves Susan $88,232 in her 32 percent tax bracket.

*Based on annual payments and a 3.2 percent charitable midterm federal rate. Deductions and calculations will vary depending on your personal circumstances.