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The Value of a Charitable Remainder Trust

Are you interested in making a gift to the School of Arts and Sciences now but have put it off because of current financial responsibilities? Why not consider using a Charitable Remainder Trust (CRT) for your gift and do both at once? Not only will you be able to make a gift to SAS and maintain an income, but you will also receive several tax advantages.

How does a Charitable Remainder Trust work? You begin by transferring assets to a trustee, in this case the School of Arts and Sciences. As your trustee, SAS will act on your behalf and each year you, or someone you designate, will receive the income from the trust. This arrangement can be for either a limited time or for the rest of your life. When the trust ends, the assets pass to the School.

What about the income, how do the payments work? The payments are determined by the type of trust your create.

A Charitable Remainder Unitrust provides a variable income based on a percentage, determined by you, of the trust assets at the time the gift is made. An increase in the value of the trust over time is a good inflation hedge.

A Charitable Remainder Annuity Trust provides a fixed income each year. This amount must be at least 5 percent and is determined by you when your gift is initially made.

What are the tax benefits to establishing a Charitable Remainder Trust with the School of Arts and Sciences?

  • Immediate tax benefits: You take an immediate charitable deduction (determined by the amount of the Trust) after establishing a CRT.
  • Avoids capital gains: A CRT permits the sale of appreciated assets by the trust without tax on the captital gain.
  • Tax-free accumulation of earnings: Income from CRTs is taxable only when distributed to income beneficiaries. Undistributed capital gains or earnings in the trust accumulate tax free.
  • Tax-favored spendable income: The CRT allows the trustee to reinvest the principal amount which, in turn, can provide tax-favored spendable income.
  • Diversification of investments: By avoiding immediate capital gains, proceeds may be invested in a higher-yielding, more diversified portfolio.
For more information on Charitable Remainder Trusts or other gift opportunities, contact Jim Schank in the External Affairs Office, School of Arts and Sciences, 3440 Market Street, Suite 300, Philadelphia, PA 19104-3325 or call (215) 898-5262. Please consult your attorney about the applicability to your own situation.

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