Create a Charitable Remainder Trust
Make a significant gift to Reed and receive income for life from your own separate trust. When the trust ends, the assets remaining in the trust go to Reed College.
You transfer cash, securities, real estate, or other assets to a charitable remainder trust. Reed can assist you in creating this trust, and often acts as its trustee. Here are the different types of charitable remainder trusts available at Reed:
You can set up a standard unitrust, which would pay you (or beneficiaries) a fixed percentage of the value of the trust, revalued each year. The unitrust payments fluctuate as the trust assets change in value each year, and, depending on good trust performance, can keep pace with inflation.
Standard Annuity Trust
You can set up a standard annuity trust, which would pay you (or beneficiaries) a fixed percentage of a fixed dollar amount for life. The trust works well if you want steady income.
You can create a testamentary trust through your will that allows you to provide income for your family members for their lives, with the remainder ultimately going to Reed.
Good Tax News
- In the year you establish a charitable remainder trust, you are allowed to claim an income tax charitable deduction for the estimated portion of the assets that will ultimately go to Reed. If you are unable to take advantage of the full amount of the deduction the first year, it may be carried over for an additional five years.
- For gifts of highly appreciated assets such as stocks, bonds, mutual fund shares, or real estate, the transfer of the assets into the trust is a non-taxable event and no capital gain is due at the time of transfer. In many cases, the donor may also avoid estate taxes on assets contributed to the trust.
- Funding a testamentary charitable remainder trust with your retirement plan assets can be especially attractive. Under current tax law, if you leave your retirement plan assets to your heirs, those assets are first subject to estate taxes, then to income taxes, frequently resulting in a combined tax burden of over 70 percent. Many of these unfavorable tax consequences can be avoided by placing the assets into a charitable remainder trust, effective upon your death.
Andrew agrees to give Reed $100,000 to fund a 5 percent charitable remainder trust. The first year, Andrew receives $5,000. In year two, the trust assets are worth $110,000; he receives $5,500 ($110,000 x 5 percent). If the trust assets are worth $120,000 at the beginning of the succeeding year, he will receive $6,000 (120,000 x 5 percent). The trust income will be revalued in this manner each year for the life of the trust.
This guide is not intended to provide specific advice about your estate plan or to recommend a specific course of action. We suggest you consult your professional advisers before taking any action, then contact Reed's planned giving office to learn more about these giving strategies.