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Charitable Remainder Trusts

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Barry Rosenbaum

Barry J. Rosenbaum, M.D., A60
My wife and I set up a charitable remainder unitrust to benefit the Friedman School. As a Tufts alumnus, I’m proud to support its mission.

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The Charles Tufts Society honors alumni, staff, and friends who have included Tufts in their estate or gift plans.

A charitable remainder trust offers a way to make a meaningful future gift to Tufts, while simultaneously providing income for life or for a specific term of years, for yourself and/or others you name.

There are two types of charitable remainder trusts: variable income (unitrust) and fixed income (annuity trust). If you are considering a gift of $100,000 or more, trusts are flexible financial planning tools that can be used to accomplish a wide range of goals. Income from such a trust can supplement other income in retirement years.

How charitable remainder trusts work

  • You irrevocably transfer cash, securities, real estate, or other appreciated property into a trust
    • Unitrusts pay you (or your designated beneficiaries) a percentage of the market value of the assets (revalued annually) for life, or a term of up to 20 years. You can add to your gift over time.
    • Annuity trusts pay you (or your designated beneficiaries) a fixed annual income based on a percentage of its original market value for life, or a term of up to 20 years.
  • At the end of the trust term (or the passing of the named beneficiaries), the remaining assets will be distributed to your designated charitable purpose(s).

Benefits of charitable remainder trusts

  • You receive fixed or variable quarterly income
  • You will receive an immediate charitable income tax deduction based on a portion of the fair market value of the assets donated to the trust. The Gift Planning Office can help you calculate this deduction.
  • If you fund a trust with appreciated securities or property, no capital gains tax is due on the stock you donate.

Important factors to consider when setting up a charitable remainder trust

  • A charitable remainder is a separate legal entity administered by a trustee. You, the university, a financial adviser, or an institution can serve as trustee. If you name Tufts to receive a minimum of 50 percent irrevocably of the remainder trust, consider choosing Tufts to trustee the trust. We currently administer a significant portfolio of charitable trusts at a very competitive rate, and any fees are paid for by the trust. Alternately, you may wish to have your financial adviser oversee the investment of the trust.
  • Setting up a charitable remainder trust is relatively easy, but you should be advised by an attorney with expertise in the area of charitable trusts and estate planning. To save you time and expense, we may be able to provide you with an initial draft of the trust agreement for review by you and your attorney.
  • In any given year, unitrust payments increase when the value of the trust increases and decrease if the value goes down.

A charitable remainder trust is for you if...

  • You want to make a major gift to Tufts University while retaining or increasing your income from the assets you contribute.
  • You hold appreciated securities and want to avoid the capital gains cost of a sale.
  • You desire maximum flexibility in the operation of your gift:
    • You want income paid to your beneficiary for a term of years instead of their lifetime
    • You want income to go to one or more beneficiaries
    • You want the option of choosing the trustees of your gift plan
    • You would like your gift to benefit multiple charities

Select a unitrust if…

  • You want the income from your gift to be able to grow over time.
  • You are interested in donating real estate, a second residence, or business .
  • You would like the option to add to the trust over time.

Select an annuity trust if…

  • You would like to receive a fixed income.

Flip Unitrust

A flip unitrust pays income beneficiaries either the trust’s net income or a fixed percentage of the fair market value of the trust (whichever is less) until a predetermined event occurs. When that event occurs, the trust “flips” into a standard unitrust, and pays you or your designated beneficiaries a fixed percentage of the market value of the assets, which are revalued annually.

  • Examples of such predetermined events are: sale of real estate, a beneficiary turning a certain age, or the passing of the donor.
  • For example, a flip unitrust can help you to secure income for a surviving spouse while also making a significant gift to Tufts.
  • Flip unitrusts can also be used to generate an immediate charitable income tax deduction and delay a stream of income until later in life.