Charitable Remainder Unitrusts: The Details

A charitable remainder unitrust is a separately invested and managed charitable trust that pays a percentage of its principal, revalued annually, to you and/or other income beneficiaries you name for life or a term of years (up to a maximum of 20). You receive a charitable income tax deduction for a portion of the value of the assets you place in the trust. After the unitrust terminates, the balance or "remainder interest" goes to the Diocese in support of their overall mission.

The unitrust advantage: flexibility

The most flexible life-income plan, a unitrust is a powerful vehicle for benefiting yourself, your heirs, and the Diocese.

You can use almost any asset to fund a unitrust, including cash, publicly traded stocks and bonds, closely held stock, partnership interests, and real estate. You can tailor your unitrust to meet many financial or estate planning goals. You can choose to receive income beginning immediately or you can structure the trust and its investments to defer most of your income to a future time (a FLIP Unitrust). If you are insurable, you can even use some of the income or tax savings produced by your plan to purchase a life insurance policy that replaces your gift and flows to your heirs outside of your estate ("wealth replacement"). We can assist you and your advisors as you design the right unitrust to achieve your goals.

Additional advantages

• Receive a charitable income tax deduction for a portion of your gift.
• Avoid all upfront capital gains tax on any appreciated assets you transfer to the unitrust.
• Reduce your estate tax liability by removing a large taxable asset from your estate.
• Increase your income over time to keep pace with inflation if the principal value of the unitrust grows (particularly appealing to younger donors and income beneficiaries).

New Opportunity

The recently enacted SECURE Act mandates that most beneficiaries of Retirement Plan Assets, other than a spouse must withdraw all funds and pay taxes on them within a 10 year period. See the new Secure Act. This can result in much larger taxes for beneficiaries and result in these no further financial benefits after the 10 year period. Donors wanting to mitigate the annual taxes AND provide lifetime income benefits for heirs may want to consider leaving their Retirement Plan Assets to a charitable remainder trust. The real beauty of this plan is the ultimate support it provides for the Diocese.

FLIP Unitrust (Professional Retirement Unitrust)

A FLIP Unitrust defers income payments until a future date when the income switch “flips” on. Until that predetermined time, the trust pays net income only. If no net income is produced, the trust pays nothing. Once the “flip” event occurs, the trust converts or “flips” to a standard unitrust that pays a defined percentage of the fair market value of the assets to the beneficiaries beginning January 1st of the following year. This flexible feature allows the trust to defer income payments until the sale of an illiquid asset, such as real estate, or to flip on a particular date set up at the time of the trust. If you set up a Professional Retirement Unitrust, the trust “flips” at your pre-determined retirement date, meaning that it then provides you with supplemental income in retirement starting January 1 of the following year. It is a great way to make a gift and supplement retirement at the same time.