What is a Charitable Remainder Trust?
A charitable remainder trust (aka the "Give it Twice Trust") enables you to receive income for life and avoid potential capital gains taxes and provides you with a current charitable income tax deduction. Real estate, cash, marketable securities, and closely held stock can all be transferred into the charitable remainder trust in exchange for lifetime income.
Since the trust is tax-exempt, when the trustee sells appreciated assets that have been transferred to it, the trust does not incur capital gains taxes. After a trust asset has been sold, the proceeds are subsequently invested in a diversified portfolio to provide you with lifetime income. At your death, the trust assets are distributed to Wheaton and potentially other charitable organizations which you support.
A charitable remainder trust is irrevocable and cannot be changed or revoked after it is created. However, the charitable beneficiaries may be amended as provided in the trust agreement.
How a Charitable Remainder Trust Works
What Will a Charitable Remainder Trust Do For Me?
The principal advantages are as follows:
- Lifetime income stream
- Avoid potential capital gains taxes on appreciated assets
- Charitable income tax deduction
- Tax-free growth of trust assets
- Diversification of assets
- Significant gift to Wheaton College
Learn About Charitable Remainder Trusts
The Charitable Remainder Unitrust (CRUT) provides a fixed percentage payment (at least 5% of the fair market value of the assets in the trust, computed annually) be paid to the income beneficiaries at least once per year for their lifetime or for a term of up to 20 years. The amount paid out each year will fluctuate according to the annual valuation of the trust principal.
Example
Jack and Joanna Hillier (both 65 years of age) own a summer cottage in Michigan. Although they enjoy having the ability to share the cottage with family and friends and have a place to vacation, the cottage maintenance is expensive, time-consuming, and often a hassle. The cottage has a fair market value of $500,000 and is completely debt-free.
The Hilliers have been thinking about selling the cottage, taking the profit, and avoiding all the typical maintenance problems. However, the Hilliers' basis in the cottage is $150,000 and they would incur significant capital gains taxes in the sale.
Here’s how Jack and Joanna can transform their cottage into a lifetime income stream for them and make a significant gift to Wheaton College.
Jack and Joanna donate the cottage to a charitable remainder trust.
The trustee sells the cottage free of any taxes since the trust is tax-exempt.
The trustee reinvests the proceeds into a diversified portfolio.
The Hilliers receive a current charitable income tax deduction of approximately $167,000.
After the cottage is sold, Jack and Joanna receive an annual income of 5% of the fair market value of the trust assets, as revalued annually. Thus, their initial annual payment will be $25,000.
Request a CRUT Illustration
Fill out a simple form to request a free personalized charitable remainder trust illustration.
Trust Management Services
A charitable remainder trust requires the services of a trustee to administer the trust provisions and invest the trust assets. Wheaton College Trust Company, N.A. is available to serve as trustee on charitable remainder trusts that significantly support Wheaton College.
Wheaton College Trust Company
Did you know that Wheaton has a national bank? Learn how The Wheaton College Trust Company can serve as executor/trustee of estates for alumni and friends who plan to benefit Wheaton College.