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CHARITABLE REMAINDER TRUSTS

 

Many of our donors wish they could help more but need to retain assets to produce income for themselves or their loved ones.  However, a donor can make a gift to the East-West Center Foundation through a charitable remainder trust and still receive direct financial benefits.  Donors can use these methods to produce supplemental income. The benefits include an income for life for the donor and/or the donor’s spouse and a charitable income tax deduction that is calculated based on the age of the trust’s beneficiaries.  These benefits come in addition to the good feeling that results from making a gift.  Upon the donor’s death, the balance of the trust assets go to the East-West Center Foundation.

 

A charitable remainder trustis an irrevocable trust that receives the gift; invests the assets; provides a donor with a lifetime income; and creates a charitable income tax deduction.  The donor selects the payout rate, usually between five percent (5%) and seven percent (7%).  The higher the payout rate, the lower the charitable income tax deduction.  This gives the donor, and perhaps the donor’s spouse, an income for life.  If the donor funds the trust with appreciated assets, the donor will avoid the immediate capital gains taxes he or she would have to pay if they sold the asset.

 

Many donors use the charitable remainder trust to convert low yielding stocks into higher income.  The trustee selected by the donor will invest in carefully selected investments.  A donor may designate the remaining funds for a scholarship or particular program at the East-West Center and establish a fund in his or her name at death with the approval of the East-West Center Foundation’s Development Committee. 

 

Donors may choose from two types of charitable remainder trusts; the annuity trust and the unitrust.  The annuity trust pays a fixed dollar amount year after year.  The income rate is determined at the time the trust is funded.  The annuity trust is most often selected by donors who seek a regular, fixed income and prefer to have the satisfaction of knowing the amount of the payment in advance.

 

Alternatively, the charitable remainder unitrust pays the donor a predetermined percentage of the fair market value of the trust’s assets as revalued annually.  If the trust’s assets increase, the donor receives a larger payment, providing a hedge against inflation.  Additional contributions may be made to a unitrust.