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Good Counsel:
What About the Children?

By Philip Golden, '81, Associate Director, Office of Planned Giving

 

Philip Golden

Fall 2015

If you wish to provide for your children and make a significant future gift to charity, you may wonder if you must choose between the two. In fact, you can achieve both goals when your estate plan includes a testamentary charitable remainder unitrust (testamentary CRUT), such as the one planned by Sue and Vic Althouse, PhD '61.

Creators of testamentary CRUTs have two characteristics. First, they want to leave part of their estate to create a managed income stream for one or more individuals--most commonly their children, but it may be for their spouse, another relative, or a friend. Second, they want to create a charitable legacy. Estate tax reduction or elimination is also a motive for some individuals.

A testamentary CRUT is created when a decedent's assets pass to a trustee. The trustee generally invests the assets to maximize the total return over time and also makes annual payments to one or more beneficiaries. The amount of the annual payments will vary depending on several factors including investment performance. The trust may be designed and administered to increase the likelihood that the annual payments keep pace with, or outpace, inflation. The payments may continue for the income beneficiary's lifetime or for a term of years, after which the trust assets pass to the charities designated by the decedent.

A testamentary CRUT is not an all-or-nothing proposition. Many people use part of their estate to make outright gifts to their children and another part to augment their children's income with a testamentary CRUT.

A charitable remainder unitrust (simply, a CRUT) also can be created during your lifetime. This type of CRUT provides an income stream either for you or for others and entitles you to a charitable income tax deduction. When appreciated assets are used to fund a CRUT, the trustee generally pays no tax on the capital gain at the time the assets are sold. This preservation of capital in the form of tax savings allows the trustee to produce a larger income stream for you or other beneficiary(ies) than would otherwise be possible if the assets were sold outside of the trust. Stanford can serve as trustee of CRUTs created during the donor's lifetime and testamentary CRUTs.

Stanford's charitable trust program is one of the largest among all U.S. colleges and universities. Our dedicated group of professionals can help you learn more about the different types of charitable trusts and options for unitrusts managed by Stanford, such as investing with the university's endowment.