Charitable Remainder Trusts
A charitable remainder trust is a powerful tool for: (1) providing funds for you and your loved ones; and (2) making a generous gift to the Garden. It allows you to transfer assets into a separately managed trust which will provide you and/or your beneficiaries with payments for life or for a specific term of years.
Charitable Remainder Unitrusts: A unitrust provides variable income based on a percentage of the fair market value of the assets, which are revalued annually. A unitrust can be funded with cash, securities, marketable real estate, or personal property. You also have the opportunity to add to the unitrust any time you wish. One of the advantages of the unitrust is that income from the trust can increase as the trust principal grows over time. With a well-managed unitrust, you should see your income steadily increase each year. Distribution to the beneficiaries of a unitrust is generally established at a set percent of the annual fair market value of the trust. You are subject to income tax on your receipt of that payment, depending on the type of income earned by the trust.
Charitable Remainder Annuity Trusts: An annuity trust provides a fixed income based on a percentage of the initial fair market value of the property on the date of the gift, to a maximum of two beneficiaries age 55 or older. Once initiated, additional contributions cannot be made to the trust. The annuity trust can be funded with cash or securities. An annuity trust appeals to individuals who want to avoid risk.
Case study: Establishing a charitable remainder unitrust
Robert Smith, 76, was an intern at the Garden in the early 1950s, and later enjoyed a successful career managing a bio-engineering firm. Smith has always planned to repay the Garden for the generous support which allowed him an early opportunity to explore career directions. He and his wife Lucy, 68, own stock now valued at $100,000 that they bought several years ago for $10,000. The stock pays an annual dividend of $1,200. They have been reluctant to sell the stock and reinvest the proceeds for greater income because they would be required to pay a capital gains tax. Instead, they decide to establish a five percent charitable remainder unitrust.
This decision allows them to—
- receive an income tax deduction of $42,970;
- increase their first-year income to $5,000;
- make a philanthropic contribution to support future Garden interns; and
avoid paying capital gains tax on their gift.
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our gardens, research and education, and serves as a role model of sustainable practices.
Santa Barbara Botanic Garden, Inc. is a nonprofit 501(c)(3) organization.
Our Tax ID number is 95-1644628.