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Charitable Remainder Trusts
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Reach Many Goals| 1. | You, as the donor, create a trust, drafted by an appropriate professional advisor with the input of a WWF representative if desired. |
| 2. | 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. |
| 3. | Each year payments are made from the trust to you and/or other beneficiary(ies). |
| 4. | You receive an income tax charitable deduction and may enjoy capital gain tax savings in the year you create the trust. |
| 5. | 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. |
| 6. | When the trust terminates, its assets become a gift to further the work of WWF. The gift portion is known as the charitable remainder. If you wish, it can be used to create a memorial honoring whomever you choose. |
A Gift With an Income That Never Changes
A charitable remainder annuity trust is 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.
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Example: Marie, 72, decides to transfer
$250,000 to a charitable remainder annuity trust. She funds the
trust with stocks that cost $150,000 and are yielding just 1%,
or $2,500, per year in income.
Marie provides that her trust will pay her 5% of $250,000, or $12,500 each year, regardless of the actual earnings of the trust. She is pleased to be able to greatly increase her income while making a significant gift to WWF. |
Here are the results she achieves: Capital gains tax Income tax deduction* ... $129,848 (Her deduction may be carried forward for as many as five
future years if amount is more than can be deducted in the year
of her gift.) |
A Gift With a 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.
| Example: In the example above, if Marie had instead chosen the charitable remainder unitrust option with payments based on
5% of the value of the assets in the trust each year, the first year she would receive
$12,500. Next year, if the assets are worth $275,000, her income rises to
$13,750 (5% of $275,000). If the value of the assets is less next year, her income will be reduced by a corresponding percentage. In this case, Marie is entitled to a deduction equal to over half of the amount with which she funds the trust. She also avoids capital gains tax at the time the trust is created. The charitable remainder unitrust can be an excellent way to provide for an income today with the possibility of future growth for those who believe that investment assets will grow in value in future years. |
For additional information contact us at legacygifts@wwfus.org.
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