Charitable Remainder Trusts

A flexible way to give and receive income

A charitable remainder trust allows you to provide income for one or more beneficiaries for a term of years or for the lifetime of the beneficiaries. When the trust's term ends or the last income beneficiary dies, the remaining assets in the trust are given to the Michigan Tech Fund for the purpose designated by you.

You will need to establish a charitable remainder trust with an outside party, such as a bank trust department. However, our Office of Gift Planning will be happy to assist you in the process. To create a charitable remainder trust, you place assets into the irrevocable trust, the assets are sold tax-free, and the trustee invests the assets, which can grow tax-free. Depending on the type of trust you choose, you can use a variety of assets including cash, publicly traded stocks, mutual funds or bonds, closely held stock, or real estate.

There are two basic types of charitable remainder trusts:

• A charitable remainder unitrust provides a payment based on a percentage (minimum of 5 percent by law) of the fair market value of the trust assets as determined annually. Income payments increase or decrease with the changing value of the trust.
• A charitable remainder annuity trust provides a fixed payment amount based on a percentage (minimum of 5 percent by law) of the initial value of the trust assets. The payments stay constant throughout the term of the trust.

The type of charitable remainder trust you choose depends on your personal goals. The unitrust, with its variable payments, may provide a hedge against inflation. The annuity trust may be more appropriate if you prefer the security of a fixed income. Another difference is that the unitrust, unlike an annuity trust, may include a provision to permit additional contributions.

Contact the Office of Gift Planning for more information.

Benefits of charitable remainder trusts

• Income payments for life or term of trust
• Immediate income tax deduction
• Avoidance of capital gains tax on gifts of appreciated assets
• Removal of assets and future appreciation from your taxable estate
• Potential increase of current income by converting low-yielding assets
• Future funding for the Michigan Tech program of your choice