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Charitable Remainder Unitrust

A charitable remainder unitrust can help you maintain or increase your income while making a significant gift to Population Connection.

If your unitrust grows, your payments will grow too, providing a hedge against inflation. A unitrust provides more flexibility than other life income plans.

A charitable remainder unitrust could be right for you if:

  • You want to provide income for yourself or others.
  • You want the possibility of income growth.
  • You want to save income taxes or capital gains taxes.
  • You want to choose the person who administers your gift and guides its investments.
  • You want to make a generous gift to Population Connection.
  • You are considering a gift amount of $250,000 or more.
 

 

Environmental and socioeconomic benefits

Women who have reproductive autonomy generally choose to have smaller families. This slows population growth and creates opportunities for social, economic, and environmental improvements. Slower population growth reduces pressures on natural resources, habitats, and food systems. Within the context of climate change, slowing population growth is key to achieving greenhouse gas emissions targets, and the health, education, and economic benefits afforded through family planning help reduce climate vulnerability and increase resilience for communities around the world.

Low Section Of Women Taking Water From Tubewell In Village Area Of Haryana, India

Health benefits

When women and couples have access to the resources necessary to freely and intentionally choose the number, timing, and spacing of their births, a wide variety of health benefits ensue also, including reductions in maternal mortality and morbidity, infant and child mortality, and unintended pregnancies and unsafe abortions.

People walking down main road in Jinka town, Naciones, Ethiopia, Africa

The powerful, neglected solution

Read more about how empowering women and girls to take charge of their bodies and lives is key to achieving the Sustainable Development Goals in this blog post.

This one action could save the world—so why does no one talk about it?

How Your Gift Helps

Your planned gift to Population Connection helps us educate young people and advocate progressive action to stabilize world population at a level that can be sustained by Earth’s resources. Among many things, your support will help us:

 
develop K-12 and secondary education materials for teachers and professors so they can easily incorporate population studies into their classes;
 
 
advocate for reproductive health and lead grassroots outreach efforts to college students to motivate them to take action on behalf of marginalized communities and our beleaguered planet.
 
 
raise awareness of population issues and the need for empowering solutions through our extensive online and offline communications. 
 

More Details

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Separate Trust

A charitable remainder unitrust is a tax-exempt trust governed by a trust agreement. You choose the trustee who is responsible for administering the unitrust and guiding the investment of its assets.

Irrevocable Gift

A charitable remainder unitrust is an irrevocable arrangement. Once you transfer assets to the trust, you cannot change your mind and get the assets back. This requirement assures that whatever value remains in your unitrust when it ends will go to support Population Connection.

Payments Vary with Value of Unitrust

Each year, your unitrust will distribute a fixed percentage of its current value, as revalued annually. If your unitrust's value goes up from one year to the next, its payments will increase proportionally. Likewise, if your unitrust's value goes down, its payments will also go down.

Remaining Assets to Population Connection

When your unitrust ends, all of its remaining principal will become available to support Population Connection.

You Choose the Payment Percentage

You choose the percentage of your unitrust’s value that it must pay each year to its income beneficiaries. The payment percentage must be at least 5%. It may be to your advantage to choose a relatively low payment percentage so that your unitrust’s assets have the best chance to grow. If the value of your unitrust grows, so will its payments. A payment rate of 5% to 6% is typical. Payments are usually made in annual, semiannual, or quarterly installments.

Payment Flexibility

You can include special payment provisions in your unitrust that make it a good way to give debt-free real estate or other illiquid assets that may take time to sell. In this situation, you can limit your unitrust's payments to its net income or its unitrust percentage, whichever is less. This way, your trustee can take the time necessary to sell your assets at a fair price. If your unitrust's net income is less than its unitrust percentage during this time, then it will distribute its net income only. This "net income" limitation can last for the entire term of your unitrust or just until a specific event occurs, such as the sale of your gift asset.

Who Can Receive Payments?

You decide who will get the payments from your unitrust. Usually, this will be you, or you and your spouse. You can, however, select other people to receive the payments. For example, you may wish to provide income for parents, a sibling, or children.

How Long do Payments Last?

While most unitrusts last for one or two lives, other terms are possible. A unitrust can last for more than two lives, for a specific length of time of up to 20 years, or for a combination of lives and years.

Tax Benefits

  • Earn an immediate income tax charitable deduction.
  • Avoid capital gains tax.
  • May reduce estate taxes and probate costs.

You will receive an income tax charitable deduction in the year of your gift. If you cannot use the entire deduction in the year of the gift, you may carry forward your unused deduction for up to five additional years. If you give appreciated securities to fund your unitrust, you will not pay any capital gains tax when you make your gift.

In addition, because a unitrust is a tax-exempt trust, it will not pay any capital gains tax when it sells these assets. This means that your trustee will be able to reinvest the full value of the assets you donate. By removing the gift assets from your estate, you may also reduce estate taxes if your estate exceeds the then applicable estate tax credit. You may also reduce probate costs when your estate is settled. The amount of these savings will depend on the size of your estate and on estate tax law in force at the time your estate is settled.

Taxation of Payments

The taxation of unitrust payments depends on the trust’s past distributions and investment performance. Payments from a unitrust are typically taxed as ordinary income. If the trust is funded with appreciated assets, a portion of the payments could be taxed at lower capital gains tax rates in some years. It is even possible for a portion of the payments to be tax-free in years when there is not enough ordinary income and capital gain income to make the payments.

Add Funds Anytime

You can make additional gifts to your unitrust anytime. Additions earn an additional income tax charitable deduction that may save you income taxes if you itemize your deductions. You will also increase future payments without the effort and expense of creating a new unitrust.

Assets to Consider Giving

The following assets make excellent sources for funding your charitable remainder unitrust:

  • Cash that you currently have in a savings account, bank CD, money-market fund, or other safe but low-yielding investment.
  • Securities, especially highly-appreciated securities.

It is also possible to create a unitrust using real estate that is debt-free or other illiquid assets that may take time to sell.

Example

Lindsey Salas is 76 years old and her husband John is 75. Many of the stocks in their portfolio have appreciated substantially in value over the many years the Salass have owned them. They are enthusiastic about making a major gift to support Population Connection, but they also would welcome a way to receive greater income from their investments without paying a big capital gains tax.

After consulting with their advisor, the Salass find that a 5% charitable remainder unitrust funded with $500,000 in assets will meet their needs perfectly. They fund their unitrust with $400,000 in stocks plus $100,000 from a money market fund. They paid a total of $75,000 for the stocks, which currently produce about 2% in dividends each year. Their money market fund has been earning about 2% interest annually.

Benefits

  • The Salass will receive $25,000 in payments in the first year of their unitrust, significantly increasing the income they had been receiving from these assets. If the income and appreciation of the trust's investments, net of costs and fees, total 7% annually, their payments will grow to over $33,647/year* in 16 years.
  • The Salass will receive an immediate income tax charitable deduction of about $240,355**.
  • The Salass' trustee will be able to sell their stock immediately in order to diversify their unitrust's investments without paying any capital gains tax.
  • Assuming its investments earn a 7% net annual return on the unitrust's investments, over $686,393* will be left in the Salass' unitrust to support Population Connection when their unitrust terminates.

*The future payment amounts and principal amount remaining for Population Connection will be lower if the Salass' unitrust earns less than 7% annually.
**The Salass' income tax charitable deduction will vary slightly depending on the timing of their gift.