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Charitable Remainder Unitrusts

A Charitable Remainder Unitrust is a separately invested and managed charitable trust that pays a percentage of the principal, re-valued annually, to the donor or other designated beneficiary for life, or for a term of years. After the unitrust terminates, the accumulated principal or “remainder interest” is paid to MCHT, for the purposes specified by the donor. The recommended minimum gift is $100,000 and this can be donated in cash, publically-traded securities, closely-held stock, real estate, or other types of assets. Additional gifts may be made at later times. Here are some of the advantages of such a Charitable Remainder Unitrust:

  • Receive an income tax charitable deduction.
    • Avoid capital gains taxes on appreciated assets donated at the time of the funding.
    • Reduce estate tax liability.
  • Increase income over time if the underlying investment performs well.

For traditional unitrusts, federal law requires a minimum payout of 5% per year of the principal of the trust, revalued annually. As an example, using a gift of $100,000, the first year’s payout would be $5,000. In the second year, if the total return of the investment of this asset was 7%, then the new value of the principal would be $102,000 ($107,000 principal, less a $5,000 payout). Therefore, at a payout rate of 5%, the second year’s income would be $5,100. Investment performance will vary, so there are no guarantees that income each year will always increase.

The income tax charitable deduction is based on the age(s) and gender(s) of the life income recipients, and the rate of return agreed to mutually by the donor(s) and MCHT.

To request a personal illustration, please contact David Warren, Planned Giving and Major Gifts Officer. All illustrations and conversations will be done on a strictly confidential basis.