Charitable Remainder Unitrust – What Are They

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Unitrusts are standard trusts with a trustee and monetary disbursements to the beneficiaries with an added difference once the trust term expires. Once the trust is no longer paid to the beneficiary, the assets that remain within the unitrust then go to the charity of whichever purposes the trust exist for by the person designating it.

Creating a trust is important for an estate owner for the heirs or beneficiaries. Taking care of loved ones is imperative after the death of the caretaker. Because this is so essential in all dealings with the estate, the trust will provide for enough time until the beneficiary’s wellbeing is no longer a concern. At that point, the trust usually reverts to the secondary purpose when created as a remainder unitrust. Supplying the charity with the remaining amount in the trust, the transfer no longer provides for the beneficiary. However, at this point, the individual may have sustained himself or herself and created an estate or accounts to ensure future success.

What Is a Unitrust?

When setting up a unitrust, the estate owner may need to convey a gift, stock or property to a person or entity. Because trusts do not incur taxes or pay capital gains taxes when selling assets at any point, these are usually the mode used by the owner of an estate. The proceeds from sales of assets then remain in the trust until the income needs to transfer to the beneficiary.

There are three different types of unitrusts, and which type will determine the amount of such payouts when necessary. However, it is the payout that has taxes taken out when the beneficiary receives the funds. The estate owner is able to obtain a tax deduction after creating such trusts.

The Charitable Remainder Unitrust Explained

Unitrusts may become a standard, net income or flip unitrust at creation by the estate owner. Tax deductions are excellent attractions for these owners to create and maintain a unitrust. These deductions could range from 30 to 60 percent of the value of assets within the trust that will transfer at some point. Federal and, in certain instances, state income tax deductions apply for these charitable unitrusts. When no immediate capital gains taxes are necessary, the estate owner may save more income by initiating these trusts. This could also lead to a reduction or elimination of estate taxes.

Through making gifts to a specific charity in this way, the estate owner may also make available income to a beneficiary simultaneously. This could diversity the investments of the estate owner and increase current and future income. However, the variable income received through a charitable remainder unitrust will range based on the fair market value of the assets within the trusts. This changes each year based on the market value of such assets. It is important to compensate for these factors. This may even permit the estate owner to ensure a more successful trust when applying multiple factors with the unitrust assets and sales.

Naming the Charity in the Unitrust

The estate owner that sets up the unitrust will need to name the charity he or she wants the remainder of the income to transfer to after the life of the trust runs out for any beneficiaries. This charity will receive the remainder of any assets sales that accrue income. These are often universities or colleges, charities that benefit society or something specific close to the heart of the estate owner. Once named, the grantor may change the charity, but it usually remains until he or she dies and then the trust remainder will transfer to this charity.

Benefits of a Charitable Remainder Unitrust

There are various reasons these types of trusts are attractive to an estate owner. This person may receive tax deductions at up to 60 percent from creating one. He or she may also bypass capital gains and estate taxes through these unitrusts. But, the income garnered through these could provide for someone that enters retirement. The income could also ensure that the heirs to the estate, such as children or dependents, will have a source of income after the death of the estate owner or when he or she is unable to assist.

Legal Assistance in the Charitable Remainder Unitrust

To ensure this type of unitrust is valid and legitimate, it is important to hire a lawyer. The legal representative may need to assist in filing the paperwork or keeping certain aspects clear of complications for future assets.


Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.

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