Charitable Remainder Trusts: Case Study
The following is an illustration of how this type of donation works.
Susan, 60, wants to make a gift to a qualified charitable organization but would also like more income in the future.
Gift: Susan creates a charitable remainder unitrust with annual lifetime payouts to her equal to 6 percent of the fair market value of the trust assets. She funds the trust with $250,000 in stock, which she originally bought for $85,000. The stock paid her annual dividends of $5,000.
Benefits to giver: Susan receives $15,000 the first year from the trust, tripling her previous income. Subsequent payout amounts vary each year depending on the annual valuations of the trust assets. She is eligible for a federal income tax charitable deduction of $81,7701 in the year she creates and funds the trust. This deduction saves Susan $22,896 in her 28 percent tax bracket.
Note: If Susan had sold the stock and not given it to the trust, she would not have received the charitable deduction, and she would have paid an additional $24,750 in capital gains tax.
Benefits to the organization: At the end of the trust term (in this case, after Susan’s lifetime), PETA is projected to receive more than $300,000 to continue our work for animals, based on 7 percent growth of the trust’s assets.
Learn How You Can Help
To discuss the good your trust could accomplish at PETA, please contact Tim Enstice at 757-962-8213 or email@example.com.
1Based on annual payments and a 3 percent charitable midterm federal rate.