Understanding Charitable Remainder Unitrusts

January 28, 2022 by Anne B. Doyle, JD

Give today and receive lifetime income

Johns Hopkins Office of Gift Planning Senior Director Anne Doyle smiles and wears a black turtleneck and gold hoop earrings.
Anne Doyle leads the Johns Hopkins Office of Gift Planning.

One of the first gifts I assisted with when I started my planned giving career involved real estate in exchange for lifetime income.

The donors, Mark and Laura, had a charming house in Florida, which over the years had tripled in value. They considered moving to a retirement community but realized that selling their house would subject them to a considerable capital gains tax. They were also committed to their local charities, and after consulting with their own advisor, they placed their home in a charitable remainder unitrust (CRUT).

Mark and Laura, as beneficiaries of the trust, received income for life. Because the unitrust was tax-exempt, the capital gains tax was not deducted from the proceeds of their home; instead it was used to fund the unitrust. And the remainder of the unitrust supported the charities they cared deeply about.

As Mark and Laura discovered, a CRUT can support a qualified charity like Johns Hopkins and provide you and/or other beneficiaries steady cash flow for life, a term of years (not to exceed 20), or a combination of both.

When the unitrust is established with a gift valued at $100,000 or more, you as the donor will receive an immediate charitable income tax deduction for a portion of the full fair market value of your gift. You choose the percentage payout you would like to receive from the unitrust (5% minimum), and this percentage is applied against the changing value of the trust. Upon the trust’s termination, the remaining balance is used by Johns Hopkins for the purpose you designate. Other popular uses for a unitrust are to:

Supplement future retirement income. Create a CRUT now, secure an immediate income tax deduction, but defer most of the income payments to a future date. Often, real estate or business interests are donated, and held by the trustee during the early years, generating little or no income. When the trust is “flipped” to make payments, the assets are re-invested in an appropriate portfolio, and the trust functions as a standard charitable remainder unitrust.

Help pay tuition or other costs for a term of years. Establish a unitrust to pay income to your children or grandchildren for educational or other expenses for a term of years. Receive a substantial income tax deduction when you create the trust and the satisfaction of securing future funding for Johns Hopkins when the trust terminates.

As always, the Office of Gift Planning welcomes hearing from you. To learn more about CRUTs, or to explore other ways to give, contact us at 410-516-4695, 800-548-1268, or giftplanning@jhu.edu.

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Topics: Alumni, Faculty and Staff, Friends of Johns Hopkins Medicine, Johns Hopkins