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Planned Giving: Charitable Remainder Trust

A charitable remainder trust is an estate planning tool that enables you to make a gift (of $100,000 or more) in exchange for an agreement for you and/or loved ones to receive an income stream for life or a term of years. The income you receive is dependent on the terms of the trust.

Through this plan, you establish an irrevocable trust with cash, securities, or other property, then determine the terms of the trust: who the beneficiaries are, the percentage of the trust's value that will be paid out annually, how long the payments will be made, and which charity or charities receive the remainder.

A trustee (you, your financial professional, or someone else you choose) manages the assets; the income beneficiaries can be you or others close to you. The percentage paid to you must be at least 5 percent of the trust's value. Your income is either a fixed dollar amount or a set percentage of the value of the trust, depending on which plan you choose. You can also decide if you want the payout to be a set period of years or for designated persons' lifetimes. When all of the payments have been met, or upon the death of the last beneficiary, the trust is dissolved and the remainder of the assets are paid to the charity or charities you have designated.

There is a wide assortment of charitable remainder trust plans available to you. For each of these plans, you can take a tax deduction for a portion of the trust's value in the year you establish the trust, and you may reduce or eliminate capital gains and estate taxes. Additionally, annual payments to you may be taxed at lower capital gains tax rates.

Donor Spotlight — Janet ("Jean") R. Kellogg and W. Keith Kellogg II

The trust plans are:

  • Annuity trust: Pays a fixed income based on the value of the assets at the time the trust is created. No additions can be made to this trust and the annual payment does not change, whether the trust assets increase or decrease in value.
  • Standard unitrust: Reflects the performance of the trust's assets, providing a fluctuating income based on the trust's annual assessed value. You can add assets to this trust after it is established.
  • Flip unitrust: Begins by distributing the trust's annual net income — which may mean no payment at all if the asset is non-performing — then flips to a standard unitrust on a specified date or event or upon the sale of an asset. This is an excellent option for donations of real estate.
  • Net income unitrust: Pays either the net income produced from the trust's assets or the designated percentage of the annually valued trust assets, whichever is less.
  • Net income with charitable remainder trust (NIMCRUT): A net income with charitable remainder trust (NIMCRUT) is similar to a net income unitrust in that the lesser of a set percentage or the actual income earned is paid to the donor, with the added provision that it makes up any deficit below that percentage with surplus income in subsequent years.

For more information about charitable remainder trusts, please contact Geoff Graham, Director, Planned Giving and Estates, at (858) 784-9365 or gcgraham@scripps.edu.