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There are two basic types of Charitable Remainder Trusts. Both types support the Institute while simultaneously earning income for you or your beneficiaries.
Charitable Remainder Unitrusts
How it works
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You transfer cash, securities, or other assets into a Charitable Remainder Unitrust. |
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The Unitrust pays a percentage of the market value of the assets (revalued annually) to you, or to the beneficiaries of your choice. |
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Once the Unitrust ends, the remaining balance passes to Wentworth Institute of Technology. |
What is a Charitable Remainder Unitrust?
A Charitable Remainder Unitrust ("Trust") is a gift plan that allows you to provide income to yourself or others while making a generous gift to Wentworth. The income may continue for the lifetimes of the beneficiaries you name, a fixed term of not more than 20 years, or a combination of the two.
As a Trust donor, you transfer assets (usually cash, securities, or real estate) to a trustee of your choice, e.g. Wentworth Institute of Technology or a bank trust department.
During the Trust's term, the trustee invests the Trust's assets. Each year, the trustee distributes a percentage of the Trust's current value, as revalued annually, to your beneficiaries. If the Trust's value goes up from one year to the next, the payout increases proportionately. Similarly, if the Trust's value goes down, the amount it distributes also goes down. For this reason, it may be to your advantage to choose a relatively low payout percentage, so that the Trust's assets can grow — which in turn will allow the Trust's yearly payments to grow.
Payments are typically between 5% to 7% of the Trust's annual value and are made out of Trust income, or Trust principal if income is not adequate. Payments may be made annually, semiannually, or quarterly.
When the Trust's term ends, the Trust's principal passes to Wentworth Institute of Technology, to be used for the purpose you designate. You may add funds to your trust whenever you like.
The minimum donation for a Charitable Remainder Trust is $100,000.
Benefits
- The income beneficiaries you name will receive annual income for life, or for the period you designate.
- You can make additional gifts to the Trust as your circumstances allow, and qualify for additional tax deductions.
- You receive an immediate income tax deduction for a portion of your contribution to the Trust.
- You pay no capital gains tax on appreciated assets you donate. If you were to sell such an asset yourself, you would owe tax on all the capital gain realized in the sale.
- Your estate may benefit from reduced estate taxes.
- Your gift will benefit from expert asset management, provided by the same professionals who manage Wentworth Institute of Technology's endowment.
- Your gift will benefit you now, and will benefit Wentworth later.
An illustration
Mark purchased Company stock 15 years ago for $100,000. This stock is now worth $200,000 and pays him approximately 2% income per year, or $4,000. While selling the stock would net an impressive profit, it would also trigger a capital gains tax of approximately $15,000.
Instead of selling the stock, Mark can set up a Charitable Remainder Trust to pay income equal to 6% of the value of the Trust assets to himself and his wife, Irene. (Note that percentage rates can vary based on the donor's situation.)
Since the Trust assets in the first year equal $200,000, his income from the Trust is $12,000 — three times more than he earned off the 2% dividends.
In addition to receiving income, Mark will receive a charitable deduction, avoid the capital gains tax, and reduce his taxable estate for estate tax purposes. |
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Charitable Remainder Annuity Trusts
How it works
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You transfer cash, securities, or other assets into a trust. |
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The trust makes fixed annual payments to you, or to the beneficiaries of your choice. |
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Once the trust ends, the remaining balance passes to Wentworth Institute of Technology. |
What is a Charitable Remainder Annuity Trust (CRAT)?
Charitable Annuity Trusts work in almost the exact same way as
Charitable Remainder
Unitrusts — the major difference being that an annuity trust pays a fixed income for life based on a percentage of the original principal of the trust.
Many of us believe that our current need for income means that we must delay philanthropic gifts until after death. However, with a Remainder Annuity Trust, you can make a generous gift to Wentworth now and also attain a better financial return than you can from your current assets. This is possible because an Annuity Trust pays you a reliable fixed income for life.
The minimum donation for a Charitable Remainder Annuity Trust is $100,000.
Benefits
- You (or your beneficiaries) will receive a stable annual income for life, or for the period you designate. This income is not subject to market fluctuations.
- Your gift will benefit you now, and will benefit Wentworth later.
- You will receive an income tax deduction for a portion of the gift's value.
- You can avoid capital gains tax and often avoid estate taxes.
- Your gift will benefit from expert asset management, provided by the same professionals who manage Wentworth Institute of Technology's endowment.
Please note that information and calculations are for illustration purposes only and should not be considered legal, accounting, or other professional advice. Your actual benefits may vary depending on the timing of the gift. |
