Charitable Remainder Unitrusts

A unitrust is an individually managed trust offering great flexibility and addressing a variety of financial objectives.

The trustee will pay the donor and/or other beneficiaries income as a fixed percentage of the value of the unitrust's principal. The unitrust is revalued annually, and income in excess of the percentage payout is reinvested. Thus the value of the unitrust, and future income payments, are projected to grow over time.

After the death of the income beneficiaries or at the conclusion of the term of the unitrust, the remaining balance is donated to Kanuga.

Kanuga can recommend trustees for a unitrust that are financially responsible and share the donor's values. Alternately, the donor may serve as his or her own trustee.

Because of the costs of administering a unitrust, Kanuga suggests a minimum gift of $100,000. The benefits of a charitable remainder unitrust include flexibility, long-term growth and potential for investment diversification.

The unitrust is flexible. It may pay income to multiple beneficiaries for lifetime or for a term of up to 20 years. A unitrust may be structured to accept gifts of assets that are temporarily non-liquid, such as real estate or a family business — assets that could not be donated for a gift annuity or an annuity trust.

Unitrusts are not subject to capital gains tax, although payments to a beneficiary may be taxable as capital gains depending on the nature of the income distributed.

A unitrust may be structured to invest solely for growth for a term of years and then to convert its appreciated portfolio to higher yielding income instruments — all with no cost in capital gains tax. Such a "build-up" unitrust is an attractive way to help provide for future retirement and tuition needs while also making a substantial gift to Kanuga.

Finally, with a charitable remainder unitrust, a donor gains the security of investment diversification by contributing individually held assets for conversion into a broader portfolio by the unitrust.

Examples of Tax and Income Benefits of Charitable Remainder Unitrusts

Unitrust One

Example Unitrust One
Contribution $100,000
Cost Basis $50,000
Capital Gain $50,000 (not reportable)
Income Rate 5 percent
First Year's Income $5,000 (Future income will vary with trust value.)
Increased Annual Income ($5,000 - $2,000) = $3,000
Charitable Deduction $44,210
Tax Savings at 31 percent $13,705
Capital Gains Tax Avoided (20 percent x $50,000) = $10,000
Total Benefit in First Year $26,705 (tax savings plus increased income)


Unitrust Two

Example Unitrust Two
Contribution $100,000
Cost Basis $50,000
Capital Gain $50,000 (not reportable)
Income Rate 6 percent or actual trust income
Investment of Unitrust, Years 1-14 Growth
Projected Value of Unitrust Principal, Year 15 $250,000
Investment of Unitrust,
Years 15 - 20		 Income
Income to Grandchildren,
Years 15 - 20		 $15,000 (estimated) – unitrust terminates after year 20
Charitable Deduction $30,620
Tax Savings at 31 percent $9,492


For information and assistance with any form of giving to Kanuga, please contact Randy Boone, Kanuga’s director of development, at 828-692-0077, ext. 240, or . Persons considering a sizeable donation to Kanuga or interested in providing for Kanuga in their estate plan should seek the advice of a financial advisor and/or attorney.