The charitable Remainder Unitrust is an irrevocable trust very similar the Annuity Trust. The primary difference is rather than a fixed annual payment the income from the trust is a percentage of the current fair market value of the property transferred, determined annually.
Mrs. Smith is a widow, owns a farm, and wants to make a gift to the Missouri Southern Foundation while receiving an income for life. Currently the farming operation is netting $6,000 a year. Mrs. Smith would like an increased income, but does not want to pay the capital-gains tax due if she sells the farm herself.
Mrs. Smith decides to transfer the farm into a charitable remainder unitrust. The trustee sells the property for $160,000 and reinvests the proceeds. Each year Mrs. Smith is paid 6.5 percent of the fair market value of the trust, determined annually. 6.5 percent of 160,000 at the end of the first year equaled $10,400. By creating a charitable remainder unitrust, Mrs. Smith was able to make a large gift to benefit MSSU, avoid capital-gains tax on the sell of the property, and increase her annual income $4,400 the first year.
This is only one example of how a charitable remainder unitrust can be used to meet the needs of a donor. In all cases, donors should consult their attorney, accountant, or estate planner when considering gift giving.