A charitable remainder trust is an individually managed trust that can be tailored to meet your needs while benefiting Hobart and William Smith Colleges. You and your designated beneficiaries receive income of at least 5 percent over your lifetimes or for a specific term of years. You receive an income-tax deduction based upon the value of the trust's remainder interest and do not have to recognize capital gain at the time the trust is created, when appreciated assets are transferred to the trust. Since the trust is tax exempt, appreciated assets may be sold without immediate capital gain consequences.
Charitable remainder trusts are generally established with gifts of $100,000 or more. You may establish your charitable remainder trust independently with a trustee and qualified fiduciary institution of your own choosing or through Hobart and William Smith Colleges' planned giving investment manager. In either case, we urge you to consult your attorney and/or financial adviser as well as the Colleges' Gift Planning Office to ensure that you have chosen the planned gift that best meets your charitable and estate planning goals.
There are two types of charitable remainder trusts: A charitable remainder unitrust pays income equal to a fixed percentage of the value of the principal which is revalued annually: a charitable remainder annuity trust pays a fixed percentage that is agreed upon when you create the trust.
With a unitrust, you agree upon the percentage you will receive when the trust is created, and the trust principal is revalued each year to determine that year's income. In addition to a regular unitrust, there are other kinds of unitrusts that may be appropriate in certain situations. The differences among the unitrusts relate to the payout of the unitrust. For example, a net income unitrust pays the lesser of the trust's actual yield or the stated percentage of the trust principal each year.
Summary:
Example
Mrs. Fletcher wants to make a gift to the Colleges' endowment, but she wants to make sure that she and her husband, both 76, will have the advantage of the income from their gift during their lifetimes. The Fletchers and their adviser talk with a representative from the Colleges and decide that they will create a $200,000 charitable remainder unitrust that will pay 6 percent of the annually valued trust assets to them each year.
Their first-year payment will be $12,000. At the end of the second year the trust principal grows to $210,000, so the Fletchers will receive 6 percent of $210,000 or $12,600. Based upon their ages, rate of return and tax bracket when they create their gift plan, the Fletchers receive an income-tax deduction of $91,504, which is based upon their ages and the rate of return they have designated.
An annuity trust works much the same way as a unitrust, but instead of receiving an income that varies with performance of the trust assets each year, you receive a fixed amount annually.
Summary
Advantages to Donor
Example
If Mr. and Mrs. Fletcher had desired a steady stream of income, rather than a variable rate of return, they might have established a charitable remainder annuity trust. If they donated $200,000 at 6 percent, they would receive $12,000 each year during their lifetimes and their income-tax deduction would be $90,628.
A graphic example of a charitable remainder trust is available.
A variation of a Charitable Remainder Trust, called a Flip Unitrust, provides the flexibility often needed for gifts of real estate. Property is placed into the trust but the trust does not pay income until a defined "trigger" event, such as the sale of the property. More information regarding Flip Unitrusts is available.
About 10 years ago, I attended a reception for Hobart and William Smith in Sarasota. Over the next several years, I visited with members of the staff when they were in Florida and greatly admired the work being done by trustee Jane Shepard Ritter '48.
Hobart College has always meant a great deal to me, and though my visits to campus have been few, I have thought about the part Hobart has played in my life and wanted to do something to ensure it would be there for others.
I settled on a charitable remainder unitrust as the best way for me to make a gift. I have been fortunate in some of my investments and used appreciated stock to fund it. Making my gift this way, I avoided capital gain tax and will receive income for life. With a unitrust, I still stand to benefit from appreciation.
My gift will one day be used to make real estate purchases with preference given to land that will be used for agricultural or scientific research, a special interest of mine after operating a large farm in Florida for all of my adult life.
Please note, individual financial circumstances will vary. The information on this site does not constitute legal or tax advice. As with all tax and estate planning, please consult your attorney or estate specialist. All material is copyrighted and is for viewing purposes only. Use of this site signifies your agreement with the terms of use. This Planned Giving section has been developed for Hobart and William Smith Colleges by Future Focus.
Thank you for your interest in supporting Hobart and William Smith Colleges.
There are several ways to make your gift to the Colleges:
If you have any questions about giving to the Colleges, or to give to a designation not listed below, please contact Beth Pier at (315) 781-3079 or pier@hws.edu
