June 4, 2018

what you learned in math class

When we were in middle school, we learned that subtraction produced a remainder, and addition a sum. It turns out that our trusted math teachers must not have known about a planning tool that not only adds to the benefits your family receives from certain assets, but actually multiplies the impact of assets in the future.  

Since the late 1960s, families and individuals have been utilizing the charitable remainder unitrust (CRUT) to make particular types of assets (especially highly-appreciated, low-yield assets) have an impact far beyond what you learned in math class. 

How a crut works

You may transfer cash or an asset (such as real estate or securities) into a charitable remainder unitrust. You will avoid capital gains tax if you use appreciated assets to fund the trust. You will also receive an immediate charitable income tax deduction at the time of the funding of the trust. These tax benefits are possible because you are making a gift of the trust remainder to a charitable organization. Your benefits begin to add up!

The trust makes regularly scheduled payments to you which may increase your income.  

the basics of a crut

For example, consider a $200,000 asset that had been producing 2% income ($4,000 each year). If used to fund the CRUT, the full $200,000 is invested to generate a higher return, perhaps providing a 6% income stream or $12,000 annually.  

For a husband and wife, both 65 years of age with a 25 year life expectancy, this adds up to an increase in income of more than $200,000 over the life of the donors (an increase of $8,000 x 25 years).

The remaining value in the trust will go to help further Texas A&M University upon the death of both husband and wife. Assuming wise management of the trust principal over the years, this remainder can easily exceed the original value of the trust. When added up, the charitable remainder unitrust can save current taxes, generate an increase in income and result in a substantial gift to Texas A&M. 

To learn how a charitable remainder unitrust can benefit you, your family and the university, contact Angela Throne ’03 in the Office of Gift Planning at athrone@txamfoundation.com or (979) 845-5638.