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The trust document is prepared by your professional advisor or The Minneapolis Foundation stipulating the terms of the trust.
A trustee is chosen (it may be The Minneapolis Foundation, the donor, or a commercial firm).
Assets are transferred to the trust.
Trusts which are trusteed by The Minneapolis Foundation are invested in a diversified investment portfolio that is managed to minimize the taxability of annuity payments.
Depending on the type of trust chosen, the payout may vary:
- With a Charitable Remainder Unitrust, the amount you receive annually is determined on January 1st of the year based on the trust’s assets and its payout rate.
- With a charitable remainder annuity trust, the annuity never varies during the life of the trust regardless of the trust’s assets.
When the trust terminates, the assets left (the “remainder”) are used to establish one or more funds at The Minneapolis Foundation. If you choose to allocate at least one-half of the remainder for Community Action or Field of Interest Funds, the Foundation reduces its customary trusteeship fee.
Example:
John and Mary have operated a business for 40 years. They want to retire but their tax advisor has told them they will have to pay capital gains tax if they sell it. But if they give it to a charitable remainder trust they can avoid the tax, get a nice income stream and even get an income tax deduction.
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Sale |
Charitable
Remainder Trust |
| Value |
$5,000,000
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$5,000,000
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| Cost Basis |
$500,000
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$500,000
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| Gain |
$4,500,000
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$4,500,000
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| Taxes Due |
$990,000
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$0
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| Remainder |
$4,410,000
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$5,000,000
You receive 5% per year or $250,000 and you get an income tax deduction of $3,000,000[1]
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[1] These calculations are for illustration purposes only and should not be considered legal, accounting or other professional advice. Your actual benefits may vary depending on your age and the timing of the gift.
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