Mr. Jones decides to donate the stock to establish a trust, known as a charitable remainder unitrust. Because Mr. Jones does not sell the appreciated stock, he will not incur capital gains tax. He will also benefit from an income tax charitable deduction of $117,045. Because Mr. Jones does not need income now and might need more income later in life, he selects the minimum payout allowable, 5%. Mr. Jones estimates that with the 5% payout rate, the trust assets will grow, as will his income.

After several conversations with Elderhostel and his own advisors, Mr. Jones asks Elderhostel to serve as the trustee and to have the trust drafted by Elderhostel’s attorneys. Following his death, the remainder of the trust will become part of Elderhostel’s Board Designated Endowment Fund and will support the educational programs, which Mr. Jones values so highly.

Case 2. Goal: Increased Income
Laura and Mark Smith, both age 78, own highly appreciated stock that yields only 3%. The Smiths want to increase their retirement income, be able to rely on a fixed amount of income each year, and benefit two charitable organizations through their one gift. Their lawyer suggests they can meet these objectives by donating $100,000 of the stock to fund a charitable remainder annuity trust, with a 6% payout rate.

Because the Smiths did not sell their appreciated stock, they do not incur capital gains tax. The Smiths also benefit from an immediate charitable income tax deduction of $48,212, and will receive yearly income of $6,000. After their deaths, the remaining principal will be distributed to their favorite charities — Laura’s alma mater and Elderhostel.

Case 3. Goal: Benefiting from a gift of real estate
Mr. & Mrs. Scholar, age 80 and 81, own a building site in a popular housing development. The site has a market value today of $500,000. Its value has appreciated greatly since they purchased it 20 years ago.

The Scholars are interested in traveling and lifelong learning and are looking for supplemental annual income to help them fund these activities.

They believe the $500,000 asset could be earning income for them. However, they realize they would pay high capital gains tax if they sold the property.

While searching for an Exploritas program online, the Scholars click on a link to learn more about supporting lifelong learning with a planned gift. They read about charitable remainder trusts and discover that contributing appreciated property to fund a charitable remainder unitrust will help them meet their objectives.

Working with their attorney and Elderhostel, the Scholars transfer their building site into a charitable remainder unitrust. The unitrust will pay them 6% annually after the sale of the real property. Because the Scholars transferred their property into the trust — instead of selling the property — they will not incur capital gains tax.

They also benefit from a charitable income tax deduction of $267,775, some of which they can claim on their current year’s income tax return. The balance of their deduction can be carried forward for up to five years, in accordance with IRS regulations.

Please Note: Benefits of a charitable remainder trust will vary depending on the timing of your gift.

Contact Us:
To receive a complete packet of information, including calculations personalized for your situation, please contact anne.forsyth@elderhostel.org or call toll free (877) 737-0664.

Anne Forsyth
Sr. Planned Giving Officer
11 Avenue de Lafayette
Boston, MA 02111-1746
Toll free (877) 737-0664

To see how a charitable remainder trust can benefit you, please use the Planned Giving Calculator, which will provide you with illustrations of the income and tax benefits to which you may be entitled.

As with any matter of this nature, we suggest you consult your attorney or tax advisor. The information presented here is not intended to be legal or tax advice.