Charitable Remainder Trusts

This agreement between you and a trustee can provide fixed or variable income to meet specific financial needs of an interim beneficiary. When this trust terminates, trust assets are passed to The Ohio CPA Foundation.

Benefits of a charitable remainder trust

• Fixed income for life
• Avoid capital gains tax on the sale of your appreciated assets
• Charitable income tax deduction for remainder portion of your gift to The Ohio CPA Foundation

A charitable remainder trust allows you to make a substantially larger gift in the future than you might be able to make at the present time. In addition, when the trust is created, an income tax charitable deduction may be taken (subject to the limitations provided by law) for the present value of the trust as of its termination. There are two basic kinds of charitable remainder trusts: the charitable remainder unitrust and the charitable remainder annuity trust.

Charitable Remainder Unitrust

A charitable remainder unitrust and remainder annuity trust share many common advantages with two important distinctions. 

A charitable remainder unitrust pays the beneficiary a fixed percentage of the principal of the trust as it is revalued annually. This type of trust provides the donor with the flexibility to make additional gifts to the trust. 

In contrast, a charitable remainder annuity trust pays the beneficiary a fixed dollar amount, which is determined when the trust is established. Additional gifts to this type of trust are not permitted. Depending on your needs, you may find one trust arrangement more attractive than the other.

Example of a charitable remainder unitrust

Mr. and Mrs. Smith have been actively involved with The Ohio CPA Foundation for a number of years. The remainder of their estate, after other bequests, debts, taxes, and expenses have been paid, will pass to the Foundation, as stated in their wills. Their estate consists of residences, stock, cash, and other property.

To increase their retirement income, the Smiths set up a charitable remainder unitrust, with a designated trustee, using a vacation home and a rental property they no longer need. The trustee will sell these properties and invest the proceeds. The couple will receive an annuity, a fixed percentage of the trust’s value each year. As the trust’s assets grow in value, the annuity payments to the Smiths will increase, allowing for a greater return in their retirement years. In addition, the Smiths may be eligible for tax deductions and other benefits.

When the Smiths’ charitable remainder unitrust terminates, the remaining trust assets will pass to The Ohio CPA Foundation. In the process of making a charitable gift to The Ohio CPA Foundation, the Smiths have increased their income, reduced their tax burden, and clarified their estate plans.

We invite you to contact us with questions and welcome the opportunity to discuss these options further with you. We highly recommend that you also speak to a financial adviser.