The Charitable Remainder Trust

Another method of making a gift with a retained right to income is the charitable remainder trust.  You fund the trust with an irrevocable gift of an asset such as real estate, stock, or cash.  A charitable remainder trust will provide:

• An income for you and/or the beneficiaries selected by you for life or a period of up to 20 years.

• An immediate and substantial income tax charitable deduction.

• The avoidance of capital gains taxes if the trust is funded with long-term appreciated property.

• The potential of a substantial reduction of probate costs and estate taxes.

There are two types of Charitable Remainder Trusts:

Annuity Trust

An annuity charitable remainder trust instructs the trustee to pay a certain specified income to the giver (and/or other beneficiaries) each year for life, and to transfer the property to a United Methodist ministry upon the death of all of the designated income beneficiaries.

The Unitrust

A charitable remainder unitrust differs from the annuity trust in one very important way -- rather than a fixed-dollar income, the unitrust arrangement must provide for income payments that vary with the investment success of the trust.  Specifically, the trust assets are valued each year and a specific percentage of the value is paid to the beneficiaries.  If the value of the trust assets goes up, the annual payment goes up.  But the reverse is also true -- the annual payments will decrease if the value of the trust assets decreases.  One other feature of the unitrust should be noted: you can make additional contributions to a unitrust, whereas they are prohibited with an annuity trust.

Other than that, the unitrust is quite similar to an annuity trust.  You can select the individual beneficiaries, fix the percentage of value that will be paid to these beneficiaries, and direct the period of time during which income benefits will be paid.  The trust can be funded with most kinds of property, and you can name anyone you wish as a trustee.  You can name one or more United Methodist Ministries to receive the trust property when the income rights terminated.