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Charitable Remainder Trust

Are you concerned about the high cost of capital gains tax with the sale of an appreciated asset like stock or real estate? Perhaps you recently sold property and are looking for a way to save on taxes this year and plan for retirement? A charitable remainder trust might offer the solutions you need.

Benefits of a charitable remainder trust

  • You (or someone you choose) can receive income for life, or for a set number of years (up to 20 years).
  • Avoid capital gains taxes on the sale of your appreciated assets like stock, mutual funds, or real estate.
  • Receive an immediate charitable income tax deduction for your gift.
  • Create a larger stream of income for you or a loved one, especially if you use low-dividend stock to start your trust.
  • If you use a retirement account to fund your trust, you can ?stretch? your payments to heirs for longer than the 10 years currently allowed, and allow them to pay less in income taxes as a result.
  • Establish a future legacy gift at UD.

How a charitable remainder trust works

  1. You transfer assets like stock or cash to fund a charitable remainder trust.
  2. In the case of a trust funded with appreciated assets, like stock, mutual funds, or real estate, the trust will then sell the assets tax-free.
  3. The trust is invested to pay income to you or any other trust beneficiaries. Depending on the rate you set for the trust, your income can grow over time.
  4. You receive an income tax deduction in the year you transfer assets to the trust.
  5. Our organization benefits from what remains in the trust after all the trust payments have been made.

Flowchart: Donor funds a trust with stock or cash. The donor receives trust payouts and the UD receives the remainder at the end of the trust term.

How to fund a charitable remainder trust

You can potentially use a variety of different assets to fund a charitable remainder trust. We have highlighted several ideas below that several friends and alumni have used to fund similar gifts at UD:

Stock or Mutual Funds. You can use stock or mutual funds that you have to fund a charitable remainder trust. This can be especially useful if you have stock that has gained a lot of value since you bought it, or if the stock is not paying much in dividends.

Funding a charitable remainder trust with stock can allow you to avoid paying capital gains taxes on the stock, may allow you to receive a charitable income tax deduction in the year that you make the gift, and can allow you to receive a larger stream of income than you would receive if you just kept holding onto the stock. And, you get to support UD in the process!

Retirement accounts. Congress eliminated the once-popular stretch-IRA in 2020, meaning that your heirs may have to take out all of the money you leave them in your retirement accounts within 10 years. And this could mean that they will have to pay a lot in income taxes in the process.

Did you know that you can start a charitable remainder trust and make the trust the beneficiary of your IRA after your lifetime? Depending on how old your heirs are when the trust is funded, they can receive payments for the rest of their life or for up to 20 years, and lower the amount of income taxes they may have to pay in the process.

Real estate. If you have real estate that you no longer need or want, did you know that you may be able to use that real estate to create a charitable remainder trust that pays you income and that can support UD and its students in the process? You may also be able to avoid paying capital gains taxes on the sale of the property and you can also receive a charitable income tax deduction in the year that you make the gift.

Cash. You can use a cash or a check to start a charitable remainder trust. You can receive a charitable income tax deduction in the year you make the gift.

Contact us

If you have any questions about a charitable remainder trust, please contact us. We would be happy to assist you and answer any questions you might have.

Additional Information

Charitable remainder trust for income. A charitable remainder trust pays you income that reflects the value of the trust's assets. Your income has the potential to increase over time as the trust grows in value.

How to select the right trust payout. There are several trust payout options to meet your needs. The best payout option may depend on the nature of the asset used to fund the trust. We would be happy to work with you and your tax advisor to determine which payout option is best for you.

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Dayton, Ohio 45469 - 7053
937-229-4484
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