Charitable Remainder Unitrust

A charitable remainder unitrust allows you to provide income to yourself or others while making a generous gift to Gettysburg College. The income may continue for the lifetimes of the beneficiaries you name or a fixed term of 1 to 20 years. As a unitrust donor, you irrevocably transfer assets, usually cash, securities, or real estate, to a trustee of your choice (for example, Gettysburg College or a bank trust department). During the unitrust's term, the trustee invests the unitrust's assets. Each year, the trustee distributes a fixed percentage of the unitrust's current value, as revalued annually, to the income beneficiaries. If the unitrust's value increases from one year to the next, its payout increases proportionately. Likewise, if the unitrust's value decreases, the payout decreases proportionately. For this reason, it may be to your advantage to choose a relatively low payout percentage so that the unitrust's assets can grow, which in turn will allow the unitrust's yearly payments to grow. Payments must be between 5% and 50% of the trust's annual value. Payments may be made annually, semiannually, or quarterly. When the unitrust term ends, the unitrust's principal passes to Gettysburg College. You may add funds to your unitrust whenever you like.

Planning Tip:
Donors should understand that capital gain tax is not bypassed in setting up a charitable remainder trust. Distributions from the trust are taxed as follows:

1. Ordinary income
2. Capital gain income
3. Tax-free income
4. Return of principal

For example, all ordinary income earned by the trust in the previous year must be distributed to the beneficiary first. If there is not sufficient ordinary income to fulfill the payment obligation, capital gain income earned by the trust is distributed and taxed as such. After all capital gain income has been distributed, tax-free income is used. Finally, if more is needed to make the trust payment, a return of the initial principal is permitted.