A donor who creates a Charitable Remainder Trust transfers assets to a trust, retains the income for life or a term of years, and makes a gift of the remainder interest to Preservation North Carolina at his or her death.
Two variations are most commonly used:
Charitable Remainder Annuity Trust
The donor retains the right to a fixed annual income based onthe initial fair market value of the trust assets. This type of trust can be used as a guaranteed annuity.
Charitable Remainder Unitrust
The donor retains the right to a variable income based on the fair market value of the trust assets as revalued annually. The process of revaluation provides a hedge against inflation.
With both types of trusts, the donor is entitled to an income tax deduction equal to the value of the remainder interest in the year the trust is established.
If the Charitable Remainder Trust is established by will, the donor's estate will be entitled to an estate tax deduction.
Creation of a Charitable Remainder Trust is an excellent opportunity for the donor to donate and then diversify appreciated property without incurring tax on capital gains.
Frequently, the diversification actually results in increased income for the donor or his named beneficiaries - in addition to a charitable deduction. Insurance, funded by the increased income, is often used to pass wealth to heirs.
Charitable Remainder Trust Examples:
A Charitable Remainder Trust will someday pay off the mortgage on PNC's headquarters. When that happens, the building will help generate revenue for PNC's work.
A Raleigh donor has established a Charitable Remainder Unitrust of $250,000 in memory of her mother. During her lifetime, the donor will receive 6% of the value of the fund each year, more income than the donated stock was producing in dividends. As the trust grows, so will her income.
In addition to the increased income, the donor also received a charitable deduction in the year of her gift. At her death, the corpus of the trust will be placed in Preservation North Carolina's endowment, and the income from the fund will sustain the memory of the donor's mother. The trust will not be part of the donor's estate.
How can I help ensure the future of Preservation in North Carolina?
Please contact us for more information on how to include PNC in your estate planning.