Charitable Remainder Unitrust Planning Tips

The unitrust pays you a fixed percentage of gradually increasing principal. Mercy Foundation offers an alternative version designed to hold a temporarily illiquid asset or a portfolio of growth securities for a period of time, while it pays the beneficiaries the lesser of the unitrust amount or the actual trust net income. Called a net-income unitrust, this option is useful to donors who want to make a gift and secure a tax deduction now but who don't need income back immediately.

A net-income unitrust can continue for its entire term, or it can make up the accrued difference between actual income payments and the unitrust amount in a specified number of years when it earns surplus income. An attractive option is the flip unitrust, which changes from an income-only payout to a fixed-percentage distribution when a pre-arranged event occurs – such as the beneficiary turning 65 or the property in the unitrust is being sold. See a flip unitrust gift example

A net-income unitrust can change its investments to income instruments with no capital-gains liability. Therefore, it is an attractive tool for younger donors to build a supplementary retirement or tuition fund that will grow tax-free, and then distributes income when they and their family need it most.

Mercy Foundation can assist you and your advisors in considering the alternative of a net-income unitrust.

Consider these ideas to benefit yourself and Mercy Foundation

• Education Trust: Create a trust for a term of years, using the income to fund a loved one's education. At the end of the term, the remainder passes to the Foundation to use where you have designated.
• Special Needs Trust: Your charitable unitrust can pay income to a separate plan set aside to meet the needs of a loved with a qualified disability.
• Parents' Trust: If you're providing annual income to parents, consider establishing a trust that pays income to them; you receive a charitable deduction at the time of funding and help both the Foundation and your family.

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