A Charitable Remainder Unitrust is a variety of a Charitable Remainder Trust. In order to obtain a charitable deduction for a remainder interest that passes to a qualified charity from a Trust, the Trust must meet several requirements.
These trusts are popular with wealthy individuals because in addition to serving a donor’s charitable purposes they can also provide him/her with an immediate charitable deduction for the remainder interest and with a retained income as beneficiary of the Trust.
They can also provide a way for the donor to convert low basis assets without directly incurring capital gains tax and reinvest the properties to their advantages.
This is because the assets transferred to the Trust eventually will pass to charitable organizations and the Trustee can sell them without current income tax consequences or at least lower consequences.
A Charitable Remainder Unitrust is a split interest Trust having a non-charitable beneficiary as the initial beneficiary and a public charity as a final or ultimate [remainder] beneficiary.
In a Charitable Remainder Unitrust, the annual distribution to the non-charitable beneficiary is a percentage of the annual value of the Trust assets.
If the Trust assets increase in value, so too will the Charitable Remainder Unitrust annual distributions, providing a good hedge against inflation for beneficiaries with a long life expectancy.
The minimum required annual distribution percentage is five percent (5%).