A charitable remainder unitrust (CRUT) is a unique planned giving option that enables you to turn an asset into an income stream while also benefiting charity. A CRUT is created and funded with cash, appreciated securities or real estate. You or your beneficiaries then receive payments of a fixed percentage of the trust’s value for life or a specified number of years. When all trust payments have been made and the trust’s life is over, the remainder will impact your chosen area at Texas A&M.
Upon the Texas A&M Foundation completing our due diligence process for acceptance of the property, your counsel will draft the CRUT documents, and the real estate is then deeded into the trust. Once the trust owns the real estate, your appointed trustee (the Foundation typically serves in this role for gifts benefiting Texas A&M) will market and sell the property. The property’s proceeds will then be invested by TIAA Kaspick, with payments beginning the January following the sale. The invested proceeds provide you or your named beneficiaries with payments for life and potentially up to an additional 20 years after your life. When the trust ends, the remaining funds in the CRUT are used to impact Texas A&M in accordance with your wishes.
Most any type of unmortgaged real estate can be used to fund a CRUT (farm, ranch, residential, commercial, etc.). You must be done using the property and ready for it to be sold. As an example, rental homes could be used to replace rental income with CRUT payments, relieving you of the hassles associated with playing landlord.
- Immediate charitable income tax deduction
- Avoidance of up-front capital gains taxes
- Payments for life/lives and potentially an additional 20 years for additional beneficiaries
- Elimination of property ownership burdens like maintenance, property taxes and other costs
- Satisfaction of supporting your favorite university: Texas A&M!
Debbie '79 and Mack Skinner '79 are great examples of how these benefits play out in real life. Read their story here.
IRS tax laws require a minimum of 5% annual payout of the trust value, but the Foundation will pay as much as 7%. The annual payout is always based on a set percentage, not a set dollar amount like a charitable gift annuity. Once the property sells, the proceeds are invested by TIAA Kaspick. For example, if the investment yields 7% in a year and the donor chooses a 5% payout, the 2% difference (less management fee) will be reinvested, and the trust will grow in value. This growth will result in a larger payment the following year. The trust has a greater opportunity to grow in value if a lower percentage payout rate is chosen, resulting in a greater sum of payments over the trust’s life. A larger payout percentage rate (7%) would result in larger payments in the earlier years of the trust, but depending on the investment returns, payments may not grow significantly over the life of the trust. The Foundation’s Office of Planned Giving can run multiple illustrations to help you choose the most advantageous payout rate.
Payments begin the January following the sale of the property, and payments will end after the trust term is over, which will be after your lifetime(s) or within 20 years after your lifetime(s). There is an IRS-required 10% remainder rule that is used to calculate how long the trust can last. If you choose not to have the payments start immediately after your property sells, you can opt to defer payments for a period of time.
Aside from working with your legal counsel to create the trust, a team of our passionate professionals at the Foundation will make this a simple and rewarding experience for you. You would work with a representative from our Real Estate Services team, a gift planner from our Office of Planned Giving, and a development officer within the college or unit that you are interested in supporting. If you have more than one passion at Texas A&M, multiple development officers will collaborate to help accomplish your giving goals.
Please contact me or one of my team members in Real Estate Services to discuss in greater detail and request a real estate giving packet to learn more.