Charitable Remainder Trusts
Under a charitable remainder trust agreement, assets irrevocably transferred to Dartmouth as trustee are managed as a separate fund. Income is paid to you and/or other beneficiaries. At the end of the trust term, the remaining assets pass to Dartmouth for its general purposes or for the use you specify when you establish the trust. A charitable remainder trust may be established during life or at death.
There are two types of Charitable Remainder Trusts
- Fixed Income: The charitable remainder annuity trust provides a fixed annual payment of at least 5% of the initial trust value and will not change over the term of the trust. Since the payments from the annuity trust are fixed, this form of gift is appropriate for older beneficiaries or for short-term income needs.
- Variable Income: The charitable remainder unitrust provides a variable annual payment of at least 5% of the trust value with the trust value recalculated on an annual basis. Thus, if the unitrust principal grows, so does the annual payment. Conversely, if the principal value declines, the annual payment will as well. Unlike the annuity trust, the unitrust can be funded with gifts of real estate or other liquid assets. In this case, annual payments begin once the property is sold and the proceeds are invested in income-producing assets. Since the trust is tax-exempt, it pays no capital gains taxes on the sale.
Charitable Remainder Trust Features
- Most frequently funded with cash, securities, or real estate. Income for life or for a term of years (not to exceed twenty) can be paid to one or more beneficiaries.
- The trust can be structured to pay either a fixed dollar amount that remains constant for the term of the trust or a variable dollar amount that is based on the trust’s annual investment performance.
- Because the trust agreement is drafted to reflect your personal objectives (within the requirements of the IRS Code and Dartmouth policies), there is a flexibility in the length of the trust term, the payout rate, choice of funding asset, and investment approach.
- A charitable deduction on your tax return for a portion of your contribution is available in the year of the gift.
Charitable Remainder Trust Benefits
- The satisfaction during your lifetime from the future support of Dartmouth you have made possible.
- Payments for life, to you and/or other beneficiaries you may designate.
- An immediate tax deduction for a portion of the value of your gift.
- An opportunity to increase your income from low-yield, highly appreciated assets while totally avoiding capital gain tax on the long-term appreciation.
- Reduced estate taxes.
Charitable Remainder Trusts Can Help You:
- Supplement retirement funds.
- Create education funds for children or grandchildren.
- Provide support for a relative, friend, or child either during your lifetime or at your death.
- Sell and reinvest appreciated assets in a tax-advantaged manner.