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More about Charitable Remainder Unitrusts

The charitable remainder unitrust is one of the most flexible gift plans available. You can make a significant gift to Mercy Foundation North while addressing multiple financial and family needs.

The unitrust is an individually managed trust paying its beneficiaries you, your spouse, family members, or other individuals income at a fixed percentage of the value of its principal, which is revalued annually. In general, here's how a unitrust works:

  • The unitrust pays income for the lifetimes of the beneficiaries, for a term of up to 20 years or for a combination of both.
  • Beneficiaries receive a fixed percentage of the value of the trust's principal, which is revalued annually.
  • Income in excess of the unitrust amount is reinvested to maintain principal and allow for growth.
  • 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 Mercy Foundation North for the purpose you designated when you created the trust.

What are the tax advantages?

  • If you fund a unitrust with appreciated securities or property, no up-front capital-gains tax is due. 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. Mercy Foundation North offers a version of the unitrust see details in planning tips and in this example that maximizes growth for a term, and then reinvests the appreciated principal in income investments with no capital-gains tax reduction.
  • You receive a charitable deduction when you create a unitrust that will be based on the full, fair market value of the assets you contribute, reduced by the present value of the assets you retained. Mercy Foundation North can help generate this deduction amount for your planning purposes.

How do you create a charitable remainder unitrust?

You should be advised by an attorney or other advisor with expertise in charitable trusts and estate planning. Mercy Foundation North will work with your advisors to help meet your financial and philanthropic goals. If you do not have an attorney, Mercy Foundation North can provide a referral. Once your trust agreement is signed, you can "fund" your unitrust by transferring assets to your trustee.

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