Many people wish they could support The HSUS, but they fear they may need their assets for their own expenses in the future.
If you are in this situation, consider setting up a charitable annuity trust or unitrust at your local financial institution.
An HSUS development officer will gladly work with the trust office at your local financial institution to help establish your trust. Because of the fees involved with trusts, this financial instrument is most appropriate for amounts of $500,000 or more. For amounts less than $500,000, we suggest that you instead consider a charitable gift annuity.
Charitable Remainder Annuity Trust
When you establish a charitable remainder annuity trust, a fixed amount of the annual income from the assets in the trust is paid to you and/or another named beneficiary(ies) for life or for a specified term of years. At your death or whenever you have determined the trust period will end, the remainder interest in the property then passes to The HSUS.
If you want to minimize your risk or increase income from low-yield holdings, these trusts are a good choice because you can lock in a fixed payment, regardless of how the value of the trust changes over time. You can also take an immediate charitable deduction and avoid or delay capital gains taxes on appreciated assets used to fund the trust.
Charitable Remainder Unitrust
A charitable remainder unitrust is like a combination of a gift and an investment. You place assets in a trust and you and/or another beneficiary receive lifetime income from the assets. At your death or whenever you have determined the trust period will end, The HSUS receives the remainder of the trust. With a unitrust, the amount you receive as income is a fixed percentage of the annual net fair market value of the trust assets.
This is a good choice for people who are less risk-averse because it provides the opportunity to increase your income as the value of your assets increases. At the same time, you do risk decreasing income should the value of your assets decline. Unitrusts also offer a sizeable income tax charitable deduction and may help to avoid or delay capital gains taxes if you donate appreciated securities.
NOTE: Unitrusts, unlike annuity trusts, also allow you to add funds to the trust over time, which may be important for people who prefer to move more cautiously with setting up this financial vehicle. Consequently, while a unitrust should probably not be started for less than $100,000, it offers the flexibility of permitting additional contributions. As your financial situation changes over time, it may make sense to add additional assets, especially appreciated securities.
Lead Trusts
Charitable annuity trusts and unitrusts can also be "lead" trusts rather than "remainder" trusts. When the lead annuity trust term ends, its payments to the charity cease and the trust distributes all of its accumulated assets to you or beneficiaries named by you.
In other words, lead trusts help your charity now and later distribute assets to you or your beneficiaries after you pass away. Remainder trusts are the opposite: They distribute assets to your beneficiaries now, while helping your charity after you pass away.
Tax advantages of lead trusts include the ability to increase charitable giving and, in some circumstances, to reduce the size of one's estate, so that when the assets are transferred to heirs upon the donor's death, estate taxes may not be as great and, in some circumstances, may be eliminated because the value of the estate has been reduced enough to diminish or eliminate estate taxes.
The income, estate, and gift tax benefits of these giving tools vary, so please check with your financial advisor or our staff on the specifics for your case.
Example 1: Remainder Trust
Allen, age 60, has a stock portfolio worth $500,000 that currently yields 4 percent dividends. Allen has decided to transfer those assets to a charitable remainder unitrust, incurring no capital gains. He arranges to receive 7 percent of the fair market value of the unitrust assets each year.
The first year, he is entitled to $35,000 (7 percent of $500,000). If the value of the trust rises next year, so will his income payments, giving Allen a hedge against inflation. When he passes away, the remainder of the assets in the trust will be released to The HSUS.
Example 2: Lead Trust
Allen's sister, Angela, age 52, also wants to support The HSUS, but prefers that her gift be available to The HSUS now, rather than after her death.
She also wishes to reduce the value of her estate so that it will be exempt from estate taxes upon her death. Therefore, Angela set up a charitable lead trust using a stock portfolio very similar to but much larger than her brother's.
The HSUS will receive payments from Angela's trust until she passes away. At that time, the accumulated assets in the trust will be distributed to her five children and, if the trust is properly drafted and administered, the estate may very well be reduced to the point that estate taxes will not need to be paid.
