Charitable Trusts | A charitable remainder trust can provide lifetime income to you while benefiting NYF. You can donate an asset, such as appreciated real estate, appreciated stock, or cash, to NYF. NYF will then sell the assets without paying capital gains tax and invest the proceeds, paying a monthly income to you for life and, if you wish, to your heirs for life or for a term of years. After the death of all income beneficiaries, your trust will help thousands of impoverished children improve their lives. What a legacy!
Your trust may provide several important tax benefits:
• Since a charitable remainder trust can sell assets without paying capital gains tax, it is particularly beneficial to donors who want to sell highly appreciated assets. Sometimes thousands of dollars that would have gone to capital gains taxes remain in the trust, generating income for you.
• You will receive an immediate income tax deduction for the value of the donation to NYF.
• The trust principal is not subject to estate tax, which can be as high as 46%.
• You may receive additional benefits, which our planned giving consultant can discuss with you.
There are two basic types of trusts. An annuity trust will pay you a fixed dollar amount for the rest of your life. A unitrust will pay you a fixed percentage of the trust’s value each year, so if the value of the trust increases over time, your income will increase with it.
Who should consider a charitable remainder trust?
Donors who want a reliable income for life, and want to bypass capital gains tax on stock or real estate, reduce estate tax, and find satisfaction in providing for some of the poorest children in the world.
Funding a Trust with Cash or Stock
Gifts of appreciated stock are ideal for funding charitable remainder trusts because the stock can be reinvested by the trust for greater lifetime income for you, and the trust may also bypass capital gains taxes at the time of the sale.
Funding a Trust with Real Estate
Appreciated real estate may also be an excellent asset to place in a charitable trust. Mature investment properties frequently earn only 2-4% of their fair market value per year. When these properties are sold and the proceeds reinvested by the trust, earnings often increase significantly.
Owners ordinarily face substantial capital gains taxes when they sell rental properties or commercial real estate. Because your charitable trust (a tax-exempt entity) would be selling the property, there would be no capital gains taxes due. Thus all the proceeds of sale could be reinvested to produce more income for you.
Giving Your Home and Keeping It, Too
A charitable life tenancy agreement allows you to give a personal residence or farm to NYF while retaining the right to live there for life. You may receive an immediate income tax deduction, avoid probate and estate tax on the property—and, of course, get the satisfaction of making a substantial gift to NYF during your lifetime.
Giving Part of Your Property
Some people find it useful to give an undivided percentage interest of their property into a charitable trust, rather than all of it. A woman recently placed 75% of a vacant lot into a charitable trust. When the lot was sold, about $70,000 came directly to her from the sale while $210,000 remained in the trust. Some of her $70,000 was taxable, but she used the income tax deduction generated by her gift to the trust to offset the tax due on the gain built into the $70,000 she received.
For More Information
To discuss how you can support impoverished children in Nepal through planned giving or to receive a free Estate Planning Kit, please call NYF at (415) 331-8585 or email robin@NepalYouthFoundation.org. Although NYF does not offer professional legal advice, our planned giving consultant can work with your tax advisor to find the best solution for you. All information is provided confidentially and without any obligation.