.	You’re considering a lifetime gift in partnership with your favorite charity > Your planning objective is increased income > Your preference is a variable income payout > You want to retain flexibility in the management of your gift

A Charitable Remainder Unitrust is the most flexible gift plan that a charity offers. The unitrust addresses multiple financial and family needs, and in so doing unlocks your ability to make a significant gift.

• The unitrust is managed as an independant trust paying its beneficiaries – you, your spouse, family members, or other individuals – income as a fixed percentage of the value of its principal, which is revalued annually. Income in excess of the unitrust percentage payout is reinvested to maintain principal and allow for growth.
• Income can be paid for the lifetimes of the beneficiaries, or for a term of up to 20 years.
• If you fund a unitrust with appreciated securities or property, no upfront capital gains tax is payable. You can contribute appreciated but low-yielding assets and put the entire value of your gift to work generating higher income for you.
• Similarly, no capital gains tax is applied to the growth of a unitrust’s principal. There is a version of the unitrust – explained in more detail below – that maximizes growth for a term, then reinvests the appreciated principal in income investments with no reduction for capital gains tax.
• Besides avoiding capital gains tax, you also receive a charitable deduction when you create a unitrust. Your deduction will be based on the full fair market value of the assets you contribute, reduced by the present value of the assets you retained. Your charity can generate this deduction amount for your planning purposes.
• When your unitrust terminates – at the death of the last beneficiary or at the end of the trust term – the remaining balance will be available to your charity to use for the project you designated when you created the trust.
• Your charity will give you gift credit for the remainder value of your unitrust – the same amount as the charitable income tax deduction, explained above.
• Consult with the development office of your favourite charity to determine if the charity maintains a minimum age requirement for unitrust beneficiaries.

Planning Tip – Grow Your Gift, and Your Income

The unitrust is designed to pay you income as a fixed percentage of what is anticipated to be growing principal. There is an alternative version that holds a temporarily illiquid asset or a portfolio of growth securities for a period of time, while it pays the beneficiaries the lesser of the unitrust percentage payout or the trust’s actual net income. Called a net-income unitrust, this option is especially useful to donors who want to make a gift and secure a tax deduction now but who don’t need income back immediately.

A net-income unitrust can continue in that format for its entire term, or it can make up the accrued difference between actual income payments and the unitrust amount in years when it earns surplus income. An attractive option is the flip unitrust, which changes from an income-only payout to a fixed-percentage distribution when a pre-arranged event occurs – such as the beneficiary turning 65 or the building in the unitrust being sold.

A net-income unitrust can change its investments to income instruments with no capital gains liability. Therefore, it is a very attractive tool for younger donors to build a supplementary retirement or tuition fund that will grow tax-free, then distribute income when they and their family need it most.

Your charity can assist you and your advisors in considering a net-income unitrust.

.	Example You're considering a gift to your favorite charity of $250,000, but you’re concerned about the capital gains consequences of liquidating assets, and about reducing cash flow for you and your spouse. Indeed, you’re looking for increased income, since you’ve committed to helping with your grandchildren’s tuition. Your portfolio contains a small commercial building that has grown in value and which has generated several offers to purchase. You decide to place the building into a net-income unitrust which will pay lifetime income (initially the rental income from the building, then a percentage of the proceeds of its sale) to you and your wife. The remainder of the unitrust will go to your charity. What are your benefits? Donors: Husband and Wife, 70 and 68 Asset contributed: Office building Amount contributed: Fair market value $250,000 Cost basis: $125,000		Click here to calculate the benefits a unitrust would give you.
.	Comparison	Unitrust	Private Sale
.	Amount transferred	$250,000	$250,000
.	Capital Gains Tax (@20%):	0	$25,000
.	Net for reinvestment	$250,000	$225,000
.	Income rate	5%	5%
.	First year’s income	$12,500	$11,250
.	Charitable deduction	$102,255	0
.	Tax savings @ 35% rate	$35,789	0
.	Total benefit, first year	$48,289*	$11,250
.	* Unitrust payment plus tax savings from charitable deduction
Note: The Unitrust is not the only gift plan that pays you lifetime income. Compare its benefits with those of the annuity trust and the unitrust.

Tips on Creating a Unitrust:

Setting up a charitable remainder unitrust is not particularly difficult, but you should be advised by an attorney with expertise in the area of charitable trusts and estate planning. Your charity will be able to provide an initial draft of a unitrust agreement for review by you and your attorney. Once your trust agreement is signed, you can "fund" your unitrust by transferring assets to the charity or to another appointed trustee.

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