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Charitable
Remainder Unitrust Example
A woman or man,
age 65, establish a charitable remainder unitrust that pays
and income for the rest of their life and that of their
spouse, age 63, if they live longer. The trust is
designed to provide an income of 5% of the amount of the
assets as they are valued each year. (The income can
rise or fall, depending on the trust's investment return.)
This type of trust is chosen because if prudently invested, it
will generate income that over time can rise with inflation.
Two people in their mid-60s have a life expectancy of
approximately 30 years. The
donor transfers $100,000 of appreciated stock to the trust.
The stock currently generates an annual dividend of 2%.
The donor wants to create more income for their retirement
years, and also wants to make a substantial gift to Winthrop
someday. At the end of the trust term (when the second
spouse dies), the asset is removed from the donor's and
spouse's taxable estate.
Amount to trust
$100,000
Current income
2%
Cost basis
$ 20,000
Capital gains
$ 80,000
Current income tax deduction
$ 34,230*
Tax savings (28%)
$ 9,584
New income
5%
Increase in income
150%
*based on quarterly payments, 7% federal midterm rate
The estate tax savings are equal to the taxes on the value of
the assets when they are transferred to Winthrop.
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