Charitable Remainder Unitrusts: The Details

A great way to make a gift, receive payments that may increase over time, and defer or eliminate gains tax. It provides steady cash flow and can be more beneficial than keeping an asset or selling it outright.

Is this gift right for you?

A charitable remainder unitrust is for you if…

  • You want to make a significant gift to Pomona College while retaining or increasing your income.
  • You hold appreciated property, such as securities, a closely-held business, real estate or partnership interests, and would like to avoid the capital gains tax associated with a sale.
  • You want the opportunity for your income to grow over time.
  • You desire maximum flexibility in the operation of your gift.
  • Best for high net worth donors with taxable estates.

A charitable remainder unitrust is a separately invested and managed charitable trust that pays a percentage of its principal, re-valued annually, to you and/or other income beneficiaries you name for life or a term of years (up to a maximum of 20). You receive a charitable income tax deduction for a portion of the value of the assets you place in the trust. After the unitrust terminates, the balance or "remainder interest" goes to Pomona College to be used as you designate.

The unitrust advantage: flexibility

The most flexible life-income plan, a unitrust is a powerful vehicle for benefiting yourself, your heirs and Pomona College.

You can use almost any asset to fund a unitrust, including cash, publicly traded stocks and bonds, closely held stock, partnership interests and real estate. You can tailor your unitrust to meet many financial or estate planning goals. You can choose to receive income beginning immediately or you can structure the trust and its investments to defer most of your income to a future time (a FLIP Unitrust). If you are insurable, you can even use some of the income or tax savings produced by your plan to purchase a life insurance policy that replaces your gift and flows to your heirs outside of your estate ("wealth replacement"). We can assist you and your advisors as you design the right unitrust to achieve your goals.

Additional advantages

  • Receive a charitable income tax deduction for a portion of your gift.
  • Avoid all upfront capital gains tax on any appreciated assets you transfer to the unitrust.
  • Reduce your estate tax liability by removing a large taxable asset from your estate.
  • Increase your income — over time to keep pace with inflation if the principal value of the unitrust grows (particularly appealing to younger donors and income beneficiaries).

FLIP Unitrust

A FLIP Unitrust defers income payments until a future date when the income switch “flips” on. Until that pre-determined time, the trust pays net income only. If no net income is produced, the trust pays nothing. Once the “flip” event occurs, the trust converts or “flips” to a standard Unitrust that pays a defined percentage of the fair market value of the assets to the beneficiaries beginning at the next valuation date. This flexible feature allows the trust to defer income payments until the sale of an illiquid asset, such as real estate, or to build up principal value on a tax-deferred basis until you retire.

Please contact us so that we can assist you through every step of the process.