Charitable Remainder Unitrust
A charitable remainder unitrust provides an income based on a percentage of the fair market value of the trust assets as determined annually. Typically, a unitrust will be revalued at the start of each calendar year, and if the value of the trust principal increases, so does your income. Because unitrust payments fluctuate with the market, this form of life income gift may provide a hedge against inflation. You can establish a unitrust at Duke with a gift $100,000 or more.
Unitrusts offer many opportunities to address specific financial goals and situations, and Duke's Office of Gift Planning can help you and your financial advisors explore options. You might establish a unitrust for a term of years to assist in funding the cost of college. You might find a unitrust to be an attractive way to convert appreciated, low-yielding assets into a high-yielding diversified portfolio without incurring capital gains tax.
Duke was recently given permission by the IRS to invest charitable remainder trusts with the university's endowment assets. While past performance is no promise of future growth, Duke's endowment has consistently been one of the top-performing university endowments in the nation. Read more.
When you establish a charitable remainder unitrust, you get to decide what program area at Duke the trust assets will ultimately support. You receive an immediate income tax deduction for a portion of the gift, and this deduction can be spread over as many as six consecutive tax years. If your gift is funded with appreciated assets, you can also reduce your capital gains liability.
Example:
Mr. Blue, age 68, transfers appreciated securities that cost him $100,000 and are now worth $500,000 to a unitrust with an annual payout rate of 6%. He is to receive payments for life. At his death, the unitrust assets will create a scholarship endowment at Duke. Mr. Blue's charitable deduction is about $236,800, and it can be used over six years Under the provisions of the trust agreement, Mr. Blue's first annual payment will be $30,000, a significant portion of which may be taxed at the lower 15% capital gains tax rate. In year two, assuming an 8% total annual investment return, the trust will have a principal balance of $510,000, and the payment will be $30,600. Assuming the same 8% total return, the payment in year three will be about $31,200, and so on for life. Mr. Blue may also completely avoid the tax on the gain he would have incurred had he sold the property instead of donating it.