Charitable remainder trusts are a highly advantageous way to benefit both yourself and the SDSM&T Foundation. Trusts give you an opportunity to provide life-time income for yourself or others while making a generous gift to charity.
Charitable Remainder Unitrusts
Establishing a unitrust requires the donor to irrevocably transfer assets (usually cash, securities or real estate) to a charity. In return for this donation, the donor receives lifetime income or can designate lifetime income to others.
Donors must also choose a trustee for their unitrust (oftentimes it is the SDSM&T Foundation). During the trust’s term, the trustee invests the unitrust’s assets. Each year the trustee distributes a fixed percentage of the unitrust’s current value, as revalued annually, to the income beneficiaries.
Additional contributions may be made to a unitrust.
Charitable Remainder Annuity Trusts
Like a unitrust, establishing an annuity trust requires the donor to irrevocably transfer assets (usually cash, securities or real estate) to a charity. In return for this donation, the donor receives lifetime income or can designate lifetime income to others.
Donors must also choose a trustee for their annuity trust (oftentimes it is the SDSM&T Foundation). During the trust’s term, the trustee invests the trust's assets.
Unlike a unitrust, the trustee distributes a fixed dollar amount to the income beneficiaries each year, regardless of the trust’s current value.
Also, additional contributions cannot be made to an annuity trust.
- Estate tax savings
- Probate cost savings
- Income tax deduction
- Capital gains tax avoidance
Example: A 69-year-old man transfers $150,000 of appreciated stock into a charitable remainder unitrust that will pay him an annual income equal to 7% of the trust's yearly value. The stock originally cost $5,000 and pays dividends of 2%. By setting up the unitrust, the donor has accomplished the following:
- More than tripled his annual income from the asset
- Avoided capital gains taxes of $21,750
- Generated a current income tax deduction of $61,050
- Made a substantial estate gift to charity
Charitable remainder trusts used together with a wealth replacement trust can benefit both the SDSM&T Foundation and your heirs.
Charitable Lead Trusts
Lead trusts are a wise way to be a philanthropist and pass wealth to family members free of gift and estate taxes.
A generous individual in high gift and estate tax brackets can provide trust payments to the SDSM&T Foundation for a number of years, with the trust principal then going to children, grandchildren or others at the end of the trust term absolutely free of (or at greatly reduced) federal gift and estate taxes.
When you set up your trust, you decide whether to create a guaranteed annuity interest or a unitrust interest.
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