Charitable Remainder Trusts​

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Charitable Remainder Trusts​

Overview

Receive Guaranteed Income for Life

Similar to a Charitable Gift Annuity, a Charitable Remainder Trust (CRT) provides fixed or variable payments to you and/or other beneficiaries you designate for life or for a selected number of years. The remainder is then put to use by the University as you direct.

A charitable remainder trust held at the University of Virginia:

  • May be funded with a minimum of $50,000 (cash, appreciated securities, or real estate*).
  • Can be directed to any University school or program.
  • May provide a charitable tax deduction equal to the present value of the future gift.
  • May reduce estate taxes.
  • Ensures that your specific philanthropic desires are realized during your lifetime.
  • Is an irrevocable gift benefiting the University.

*Starting in 2023, if you are at least 70 1/2 years old, you may use an IRA qualified charitable distribution to create a charitable gift annuity or charitable remainder trust. There are some nuances we will be happy to discuss with you. More information is available here.

Charitable Remainder Trusts​

Types of Charitable Remainder Trusts

Unitrust (CRUT)

A standard unitrust is revalued each year and your income payments for that year are determined based on the new trust value. Trust value reflects investment performance, and as the trust grows or declines, so does your income payment. You may make additional gifts to this type of trust. A trust addition may allow you an additional charitable tax deduction and is an excellent way to increase the income you already receive.

Net Income Unitrust

This trust pays the beneficiary(ies) the lesser of either the percentage payout rate or the income actually generated within the trust. A net income trust is particularly useful when funded with an illiquid asset such as real estate.

Flip Unitrust

A flip unitrust combines the benefits of a net income unitrust with those of a standard unitrust. The trust functions like a net income trust until the funding asset (real estate or another asset) is sold by the trustee or until a specific date chosen by you (for example, your date of retirement). The trust then “flips” to a straight unitrust, and the beneficiary(ies) begins receiving payments based on the percent payout rate selected when the trust was created.

Annuity Trust (CRAT)

This trust pays a scheduled fixed amount for the entire trust term regardless of the changing value of the trust assets. Additions may not be made to this type of trust.

How Do CRTs Work?

Example: A Charitable Remainder Unitrust

Mr. Nelson, age 60, has watched his stock portfolio fluctuate over the past 40 years. He is interested in making a $100,000 gift to the University to fund a scholarship, but is concerned that he might need these assets during retirement. Mr. Nelson decides to fund a $100,000 charitable remainder unitrust using some of his appreciated stock. He will receive 5% of the trust’s value annually — $5,000 in the first year — thus adding to his retirement income. Mr. Nelson is also able to take a $39,752 charitable deduction for funding the trust. Any growth in the trust above the 5% paid out in income to him will remain in the trust. The trust will be revalued at the beginning of each year and Mr. Nelson’s income payments for that year will be based on the new trust value. As the value of Mr. Nelson’s trust grows, so will his income.

Example: A Flip Unitrust

Mr. and Mrs. Baker, both in their 70s, purchased their beach house in the 1970s for $75,000. Even though they have spent many wonderful summers with their son on the property and have supplemented their family income by renting it to others, the beach house has now become a burden. The Bakers decide to place the beach house in a flip unitrust that will benefit them and their son. The property is appraised and sold the same year for $350,000. Until the property is sold, the Bakers will receive only the income produced by the property. After it has flipped, they, and then their son, will receive 5% of the trust value annually. After their son dies, the University of Virginia will receive those assets remaining in the trust.

Use our Gift Calculator to see how a charitable remainder trust can work for you.

Donor Stories

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Ken Muhlendorf (Col ’69, Med ’74) still appreciates the way UVA helped him and his wife, Diane, when they were a young couple on Grounds. “The University looks out for its students,” he said.

*The University’s endowment and trust assets are managed by the University of Virginia Investment Management Company (UVIMCO), a nonprofit University-related foundation. To view UVIMCO’s Investment Policy Statement and annual investment returns go to https://www.uvimco.org.

The University of Virginia 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.