Charitable Remainder Trusts

Download a PDF brochure on Charitable Remainder Trusts.

Charitable Remainder Trusts

The Charitable Remainder Trust: A Great Way to Give—And to Receive
A charitable remainder trust is a wonderful way to make an impact on the Law School and create a reliable payment stream for you and/or the beneficiaries you select.

How Does It Work?
A charitable remainder trust (CRT) is available in a variety of formats and can be funded with a wide range of assets, including securities, cash or real estate. A CRT provides annual payments to you and/or other beneficiaries you designate for life or for a selected term of years. The remainder is then put to use by the Law School as you direct. For a minimum funding level of $50,000, you may appoint the University of Virginia as trustee of your trust, and the trust assets will be managed by the University of Virginia Investment Management Company.

Relief From Taxes
If you establish a CRT, you may be eligible to receive several tax benefits, including a current charitable income tax deduction, a bypass of capital gains tax on appreciated assets, and a reduction in estate taxes. Your tax adviser will help you determine how each of these benefits applies in your specific situation.

Example

Mr. and Mrs. Smith are 69 years old. Together, they fund a charitable remainder unitrust with $75,000 in appreciated securities.

Based on a 6% unitrust payment, the Smiths will receive in the first year a $4,500 unitrust payment. In the following years, that amount will change based on the trust’s annual value. The unitrust payment will be paid to both of the Smiths while they are both living, then to the survivor for the rest of his or her life.

In addition to their annual payments, the Smiths will be entitled to a charitable income tax deduction of $26,019.75 in the year they establish their trust.

The money left in the trust after the Smiths have died will support the Law School in the way the Smiths designated when they set up their trust.

Regular Payments—A Great Way to Supplement Your Income
You and your beneficiaries will receive regular payments from the trust for the entire trust term. Payments typically range between 5% and 7% of the trust value if the University serves as trustee.

If you establish a charitable remainder annuity trust (CRAT), your annual payment will be a fixed percentage of the initial value of your trust. Your trust “annuity” payment will not fluctuate from year to year based on market performance, and you will receive a predictable payment stream during the trust term.

If you instead establish a charitable remainder unitrust (CRUT), your annual payment will be a fixed percentage of the trust’s principal as it is revalued each year. Thus, your “unitrust” payment will increase when the trust value increases, allowing you to benefit from strong market performance, but will decrease if the trust value decreases.

If you want to fund a trust with a gift of real estate (or other hard-to-sell assets), you might want to establish a special kind of CRUT known as a “Flip” CRUT. Until the trust sells the real estate, your annual payments will comprise only the net income of the trust. After the sale, however, you will begin receiving annual unitrust payments as described above. A “Flip” CRUT can provide a great way to convert unneeded illiquid assets into a regular payment stream for you and a wonderful legacy for the Law School.

Typically, your CRT annual payment will be made quarterly, but you can decide how often you want to receive your payments when you establish your trust.

Your Legacy for the Law School
At the end of the trust term, the assets remaining in the trust will be distributed to the Law School Foundation for the purposes you designate. For example, you might direct that the remainder be distributed for the Law School’s unrestricted use, to support loan forgiveness programs, to enhance student intellectual life, or to establish a scholarship or professorship in your name.

Whom Do I Contact?
For more information about how to establish a charitable remainder trust to benefit the Law School, please contact Elizabeth Leverage ’92:
1-877-307-0158
eleverage@virginia.edu
Law School Foundation
580 Massie Road
Charlottesville, Virginia 22903-1738

The University of Virginia Law School Foundation does not provide legal or tax advice. We recommend that you seek your own legal and tax advice in connection with gift and planning matters. To ensure compliance with certain IRS requirements, we disclose to you that this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding tax-related penalties.