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Charitable Remainder Trusts
Two basic types of charitable remainder trusts
qualify for federal tax benefits. In both
arrangements, a donor gives stock, cash, or other
assets to a trust. Those assets are invested,
producing income for the donor - or other
beneficiary - either for a fixed period of time or
until the donor dies. The donor is allowed to claim
a tax deduction for the estimated portion of the
assets that will ultimately come to LCSC. When the
donor dies, LCSC keeps all remaining assets.
The two types of remainder trusts are Unitrusts and
Annuity Trusts. Under a basic Unitrust, the donor
receives one or more yearly payments equaling a
fixed percentage of the value of the asset, which is
assessed each year. Under a net-income unitrust, the
donor receives only the income earned by the trust,
even if the trust earns less than the payout rate.
However, the trust can be set up to include a
"make-up provision," which allows the donor to make
up the lost income, provided the trust earns more
than the payout rate in future years.
Under an Annuity Trust, the donor receives a yearly
fixed payment equaling at least 5% of the value of
the asset at the time the deferred-giving agreement
was signed.
By making Charitable Remainder Trusts, donors can
get income-tax deductions and escape capital-gains
taxes. Many donors find the trusts an appealing way
to prepare for retirement. The assets can be
invested to earn a lower rate of return when the
donor is younger and then shifted to earn a higher
rate of return, and thus provide more income during
the donor’s later years.
For more information on Charitable Remainder Trusts,
please contact the College Advancement Office at
(208) 792-2458.
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