Unwrapping Gifts Video Series: Learn more about legacy gifts and Duke
A charitable remainder unitrust provides an income based on a percentage of the fair market value of the trust assets as determined annually. Typically, a unitrust will be revalued at the start of each calendar year, and if the value of the trust principal increases, so does your income. Because unitrust payments fluctuate with the market, this form of life income gift may provide a hedge against inflation. You can establish a unitrust at Duke with a gift $100,000 or more.
Unitrusts offer many opportunities to address specific financial goals and situations, and Duke's Office of Gift Planning can help you and your financial advisors explore options. You might establish a unitrust for a term of years to assist in funding the cost of college. You might find a unitrust to be an attractive way to convert appreciated, low-yielding assets into a high-yielding diversified portfolio without incurring capital gains tax.
Duke has been given permission by the IRS to invest charitable remainder trusts in a way that mirrors the university’s endowment investments. While the downturn of the market in 2008-09 led to a disappointing one-year outcome, our endowment investment performance has consistently placed among the top of our peers over rolling ten-year periods.
When you establish a charitable remainder unitrust, you get to decide what program area at Duke the trust assets will ultimately support. You receive an immediate income tax deduction for a portion of the gift, and this deduction can be used over as many as six consecutive tax years. If your gift is funded with appreciated assets, you can also reduce your capital gains liability.
Example: On January 1, 2016, Mr. Blue, age 68, transfers appreciated securities that cost him $100,000 and are now worth $500,000 to a unitrust with an annual payout rate of 6%. He is to receive a payment from the trust on each December 31 for life. At his death, the unitrust assets will create a scholarship endowment in his name at Duke. Mr. Blue’s charitable deduction is over $218,500, and it can be used over as many as six years. Mr. Blue’s annual payment in 2016 will be $30,000 (6% of $500,000). During the course of 2016, the trust’s investments appreciated at a rate of 8%, so the trust’s balance is $540,000 on the next December 31 prior to Mr. Blue's payout; after his payment, the trust's balance is $510,000 ($540,000 - $30,000). On January 1 of the next year, the trust's 6% payout rate is applied to this new balance of $510,000, yielding a payment amount to Mr. Blue for that year of $30,600 ($510,000 X 6%).