For those considering a transfer of six figures or more, trusts are very flexible planning tools that can be used to accomplish a wide range of goals. Some people rely on them to reduce property management chores. Others use trusts to delay distribution of property to heirs on account of their age or for any number of other reasons.
Trusts also allow a person to arrange for their property to first be put to one use, then to another. A Charitable Remainder Trust offers a way to arrange a meaningful gift to Annandale Village while first providing income for yourself and/or others you name.
Here’s how such a trust functions:
- You, as the donor, create a trust, drafted by an appropriate professional advisor with the input of an Annandale Village representative if desired.
- Cash or other property is transferred to the trust to be managed by you or another person or other entity you choose as trustee. The trustee manages the property for you, your spouse, and/or other beneficiaries you choose.
- Each year payments are made from the trust to you and/or other beneficiary(ies).
- You receive an income tax charitable deduction and may enjoy capital gain tax savings in the year you create the trust.
- Payments continue until the trust ends. The trust document specifies the time when this is to occur, such as at the death of the last beneficiary or after a stated period of time.
- When the trust terminates, its assets become a gift to further the work of Annandale Village. The gift portion is known as the charitable remainder. If you wish, it can be used to create a memorial honoring whomever you choose.
GIFTS WITH AN INCOME THAT NEVER CHANGES
A Charitable Remainder Annuity Trustis a way to make a gift while receiving a fixed, regular income. Income from such a trust can be a reliable supplement to other income in retirement years. Through the use of such a plan, professional management of assets can also be achieved for you and/or surviving loved ones. The payments received each year must be at least 5% of the amount originally placed in the trust. You determine the exact amount when your trust is created.
GIFTS WITH FLUCTUATING INCOME
Like the annuity trust, the Charitable Remainder Unitrust provides for a gift while a donor retains income. But unlike the annuity trust, the income from a unitrust fluctuates with the value of the assets placed in the trust.
You determine the annual payout percentage when the gift is made. Each year this percentage (at least 5%) of the value of the trust assets is paid to you or others you name. When the value of the investments goes higher, more income is received. The income will be less if the value of the assets declines. Additions can be made to this trust, and a tax deduction is allowed for part of each amount contributed.
For those who have reached the limit that can be deducted for contributions to Individual Retirement Accounts (IRAs) and other retirement plans, the charitable remainder unitrust could play a welcome role in building additional income for retirement years.