Good Counsel: The benefits of donating real estate to a charitable remainder unitrust

When donors establish a charitable remainder unitrust at Stanford, they are entitled to an immediate charitable income tax deduction for a portion of the gift value. The named beneficiary(ies) of the unitrust will receive an income stream for life and/or a term of years, and the remaining funds will support Stanford when the trust terminates. Once property is transferred to the unitrust, the trustee can then sell it. Because of the unitrust’s tax-exempt status, it does not pay any tax on the capital gain, and the full amount of the sale proceeds is invested in a portfolio of marketable securities or, when eligible, alongside the Stanford endowment. The income paid to the named beneficiary(ies) is taxable to them and varies from year to year based on the annual fair market value of the unitrust.

What sort of real property should be considered for a charitable remainder unitrust? 

The ideal property is one that has appreciated in value over the years, is marketable and ready to sell, and is free from existing debt. The property can either be income producing—as in Jimmy and Jean Kan’s case—or non-income producing, like a vacation home or even a primary residence that the donor no longer occupies. Donors can manage the sale of the property by serving as the initial trustee of the unitrust, after which Stanford could potentially serve as successor trustee. Or donors can ask if Stanford would agree to serve as initial trustee to manage the sale. 

When donors create a charitable remainder unitrust with Stanford, they are invited to become a member of Stanford’s Founding Grant Society, a legacy society that honors those who have made a planned gift to the university.

My colleagues and I would be happy to help you and your advisors decide whether a charitable remainder unitrust or other type of planned gift is right for you. To learn more, please contact the Office of Planned Giving at (650) 725-4358.