A charitable remainder unitrust is a gift plan defined by federal tax law that allows you to provide income to yourself or others while making a gift to the College. The income may continue for the lifetimes of the beneficiaries you name, a fixed term of not more than 20 years, or a combination of the two.
As a unitrust donor, you irrevocably transfer assets, usually cash, securities, or real estate, to a trustee of your choice. During the unitrust's term, the trustee invests the unitrust's assets. Each year, the trustee distributes a fixed percentage of the unitrust's current value, as revalued annually, to your income beneficiaries. If the unitrust's value goes up from one year to the next, its payout increases proportionately. Likewise, if the unitrust's value goes down, the amount it distributes also goes down. For this reason, it may be to your advantage to choose a relatively low payout percentage so that the unitrust assets can grow, which in turn will allow the unitrust's yearly payments to grow.
Payments must be between 5% and 50% of the trust's annual value and are made out of trust income, or trust principal if income is not adequate. Payments may be made annually, semiannually, or quarterly.
When the unitrust term ends, the unitrust's principal passes to Illinois College of Optometry to be used for the purpose you designate. You may add funds to your unitrust whenever you like.
- You will qualify for a federal income tax deduction. Note that deductions for gifts of long-term appreciated property will be limited to 30% of your adjusted gross income and gifts of cash and non-appreciated property will be limited to 50% of your adjusted gross income. You may, if necessary, take unused deductions of either kind over the next five years, subject to the same 30% or 50% limitation.
- The income beneficiaries you name will receive annual income for life or for the period you designate.
- If you fund the trust with an appreciated asset and the trust sells it, there will be no immediate tax on the capital gain. If you were to sell such an asset yourself, you would owe tax on all the capital gain realized in the sale.
- Your estate may enjoy reduced probate costs and estate taxes.
- You will provide generous support to the Illinois College of Optometry.