Charitable Remainder Trusts
With a charitable remainder trust, the donor irrevocably transfers assets to a trust in which payments are made to one or more beneficiaries over their lifetimes or for a term of years. When the trust ends, its remaining assets are distributed to Sarah Lawrence College. Such trusts can be funded with cash, appreciated securities, real estate or even tangible personal property. They are typically feasible in amounts of $100,000 or more, and can be set up as annuity trusts, where annual payments are fixed based on a percentage of the initial fair market value of the trust's assets or unitrusts, where payments are a percentage of the trust's assets as valued annually. The payment rate for either type must be a minimum of 5%.
Charitable remainder trusts offer a number of attractive benefits:
- Annual income for yourself and/or other beneficiaries for life or a term of years
- An immediate charitable income tax deduction
- Possible elimination of capital gains tax when funded with appreciated assets
- Estate tax savings
- Ability to support more than one charitable interest
Example
Howard Abramson, 80, would like to establish a named scholarship in honor of his wife, Ellen. He owns stock, purchased 10 years ago for $50,000, now worth $250,000, which pays him approximately 2% income per year. He decides to transfer the stock into a charitable remainder unitrust. The trust sells the stock free of any capital gains tax, and will pay him an income equal to 7.0% of the trust's assets as valued annually, with a first year's payment of $17,500. He is also entitled to a charitable income tax deduction of $149,140* for the year in which the trust is established.
*Based on a discount rate of 6.2%
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For more information, please contact Annetta Love, Director of Planned Giving, at (914) 395-2325.