Charitable remainder trusts are an ideal form of philanthropy for those who wish to make a charitable gift to the College and to receive income for their lifetimes and/or the lifetimes of others. Under a charitable remainder trust agreement, assets irrevocably transferred to Mercyhurst as trustee are managed as a separate fund. Income is paid to you and/or other beneficiaries and, at the end of the trust term, the remaining assets pass to Mercyhurst for its general purposes or for the use you specify when you establish the trust. A charitable remainder trust may be established during life or at death.
Types of Charitable Remainder Trusts
- Fixed Income: The charitable remainder annuity trust provides a fixed annual payment of at least 5% of the initial trust value and will not change over the term of the trust. Since the payments from the annuity trust are fixed, this form of gift is appropriate for older beneficiaries or for short-term income needs.
- Variable Income: The charitable remainder unitrust provides a variable annual payment of at least 5% of the trust value with the trust value recalculated on an annual basis. Thus, if the unitrust principal grows, so does the annual payment. Conversely, if the principal value declines the annual payment will as well.
- Unlike the annuity trust, the unitrust can be funded with gifts of real estate or other liquid assets. In this case, annual payments begin once the property is sold and the proceeds are invested in income-producing assets. Since the trust is tax-exempt, it pays no capital gains taxes on the sale.
Charitable Remainder Trust Basics
- A charitable deduction on your tax return for a portion of your contribution is available in the year of the gift.
- Most frequently funded with cash, securities, or real estate
- Income for life or for a term of years (not to exceed twenty) can be paid to one or more beneficiaries
- The trust can be structured to pay either a fixed dollar amount that remains constant for the term of the trust or a variable dollar amount that is based on the trust’s annual investment performance
- May reduce estate taxes
- Ensures that your specific philanthropic desires are realized during your lifetime.
- Is an irrevocable gift benefiting the College that can be directed to any College program
Charitable Remainder Trust Benefits
- Payments for life, to you and/or other beneficiaries you may designate
- An immediate tax deduction for a portion of the value of your gift
- An opportunity to increase your income from low-yield, highly appreciated assets while totally avoiding capital gain tax on the long-term appreciation; and
- Reduced estate taxes
- Can help supplement retirement funds
- The satisfaction during your lifetime from the future support of Mercyhurst you have made possible
Important Please notify the College of your gift so we can acknowledge your generosity as part of the Mercyhurst O’Neil Society.
Disclaimer Mercyhurst College does not provide legal, tax or financial advice. We strongly recommend that you consult professional advisors on all legal, tax or financial matters, including gift planning considerations. To ensure compliance with certain IRS requirements, we disclose to you that this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding tax-related penalties.