Charitable Remainder Unitrusts: FAQs

In working with your team of professional advisors, a number of choices are available about who would be the best trustee for you. Please contact us to discuss this further.

If the trust is funded by liquid assets, a unitrust is typically invested in a balanced portfolio that is designed to produce both income and growth over the term of the trust. If the trust is funded with non-liquid assets, the trust may be held for growth in capital appreciation rather than current income. At some later date, the non-liquid assets could be sold (avoiding capital gains taxes) and re-invested to produce income for the beneficiaries.

Gifts of cash or appreciated property yield the same result for tax deduction purposes. However, gifts of appreciated property have the added value of avoiding capital gains taxes on the trust.

Your income will be taxed according to the type of investments and payout rate of the trust. You will usually pay tax at the ordinary income level on any ordinary income that is distributed, up to your full payment. The rest of your income will be taxed at the next lowest rate, usually as capital gains, then as tax-free return of principal.

In most cases, yes. The value of the trust principal will be determined by a qualified appraisal of the property. However, real estate or other property may not be producing income and thus the income beneficiaries may receive no or very little income until these assets are sold and re-invested to produce income.

A charitable remainder unitrust is a powerful tool that can save you income, capital gain, estate and inheritance taxes depending on your circumstances and state of domicile. A qualified advisor is crucial to assist you in maximizing these benefits.