With a Charitable Remainder Unitrust (CRUT), a donor irrevocably transfers money or appreciated property to Lutheran Foundation of the Southwest (LFSW) in return for an annual income from the reinvested assets for the donor and/or other beneficiaries. At the beneficiary's death, payments cease and the remaining Unitrust assets (the "Charitable Remainder" gift) go to the ministries of our sponsors as you have designated.

An individual donor may have multiple Unitrusts, or can add funds/assets to an existing Unitrust anytime during its term.

What are some of its key benefits?

• Helps provide a wide spectrum of caring services through dynamic Lutheran ministries in Texas.
• Can provide income for another as well as for yourself - a spouse, parent, child, etc. Income can be paid to you for life and then to another family member, or for a specified period of years.
• Generates income from under-producing appreciated assets. Payout rates after the sale of the assets may well exceed dividends, rental fees or other potential revenues otherwise available.
• Eliminates Capital Gains Taxes, which can be as high as 25% if the assets are sold outright by the donor.
• Reduces or eliminates Estate Taxes by removing the value of the donated asset or money from your taxable estate.
• Increases potential payouts (compared with fixed amount annuities) when fair market values increase. This can be a powerful hedge against inflation.
• Allows additional assets to be given into the existing Unitrust at any time.
• Can be used to delay distributions to beneficiaries until they reach a certain age or meet other criteria.
• Provides income that is taxed at lower overall rates than ordinary income-tax rates.
• Reduces income taxes. A portion of the appreciated asset donation is income tax deductible, even though the annual payouts themselves may be taxable.

How does a Charitable Remainder Unitrust work?

A Charitable Remainder Unitrust pays a donor income based upon a fixed percentage of the fair market value of the donated assets, instead of a fixed dollar amount as with some other types of Life Income Agreements. This fluctuating payout - calculated annually - is based upon the fair market value of the assets each January 1. This type of agreement can be especially beneficial to donors because any earned income not paid out is added to the principal for subsequent years' calculations and added to the earnings. Actual payments can be made quarterly or annually.

LFSW offers three types of CRUTs:

Standard CRUT

The beneficiary receives a designated percentage income each year, whether the fair market value has increased, decreased, or remained unchanged.

NIM-CRUT

Net Income with Makeup Charitable Remainder Unitrust. With this variation, the beneficiary receives the stated percentage each year up to the net income earned by the Unitrust. Any deficiencies are accrued and made up in subsequent years when actual income exceeds the stated percentage payouts.

NI-CRUT

Net Income Charitable Remainder Unitrust. Here, the beneficiary receives the stated percentage of the fair market value or the actual net income earned in the preceding year, whichever is lower. There is no accrual provision for shortfalls.

Who should consider a Unitrust?

A Unitrust can start paying income to the donor or designated beneficiaries in the same quarter it is set up. However, a Unitrust most directly benefits any individual who needs a current tax deduction but can defer receiving additional income. Thus, a NIM-CRUT can be used as a retirement plan. The trust is initially invested for principal growth, earning little or no income, and making no payments. Then at a later date when income is desired, the trust is shifted to higher-yield assets so that lots of income is available to make up the earlier deficits.

Sample illustration:

Fred and Mary Dickerson (ages 73 and 68 respectively) own land in South Texas which they have farmed since they bought it for $125,000 in 1968. Their property has recently been appraised at $275,000. With no children, the Dickersons farm the property themselves, but now health challenges are forcing both to retire. This land is their only real asset. The best rental offer they have had on their property is $8,500 a year - a measly 3% return; a direct sale will incur approximately $30,000 in Capital Gains Taxes. They elect instead to donate their property to LFSW to fund a Charitable Remainder Unitrust (NIM-CRUT) that pays them a 6% annual income for both of their lifetimes.

Based upon the current appraisal of the property, the Dickersons will receive $16,500 income during the first year. Payments could increase each year if the value of the trust rises. Additionally, they receive...

• An immediate Capital Gains Tax savings of $30,000
• Income tax deduction of $101,428 in the year of the gift
• Potential income (based on actuarial tables) of over $435,005 during their lifetimes
• The satisfaction of an ultimate remainder gift of over $439,629 to Lutheran ministries (per these same actuarial tables).

Example only. Actual data, income and tax deductions vary case by case. Your LFSW consultant can answer any further questions you might have and develop specific illustrations for your personal estate planning needs and goals.

For a no-cost, no-obligation consultation in the privacy of your home, please complete the free offers page on this website or call 1-800-424-0447.