By Anthony Barclay
Director of Planned Giving
Office of Development

In the preceding story, the Rice's used a charitable remainder unitrust to fund a scholarship for music majors. Many people are unfamiliar with trusts and what they are used for. Different trusts can be used for different purposes, but they are all advantageous to the donor. Through a trust, you can--

* Provide income to yourself or someone else for a period of years or life.
* Delay distribution of money or other property; for example, until a child reaches a certain age.
* Have property professionally managed for life or a number of years.
* Avoid capital gains tax for highly appreciated assets (securities with a low cost basis) and receive charitable tax deductions.

A trust is a legal document written by a lawyer where the actual document can range from one page in length to hundreds of pages. As the donor, property (appreciated securities, land, cash) is transferred and used to fund (establish) the trust. Highly appreciated assets producing little or no income can be placed in the charitable trust, sold, and reinvested in high-yielding assets producing greater income without incurring a capital gains tax of 20 percent. The donor can serve as trustee (manager of the trust) or have it professionally managed by a brokerage house or financial institution. Income form the trust is payable to the beneficiaries for up to 20 years, or for one or more persons' lifetimes. When the trust term ends, the property remaining in the trust (the charitable remainder) becomes a gift to the MUW Foundation. The Foundation would then use the money to satisfy the wishes of the donors as stated in the trust document for betterment of the university. David Rice wanted the money to be used to fund a scholarship in honor of his wife, Martha. David and Martha consulted with the Office of Development, and they decided what the criteria would be for the scholarship. The university will use the charitable remainder and invest it with the interest being used to award the scholarship each year. This way, the principle will never be touched, and the scholarship will be awarded in perpetuity.

As stated, there are different types of trusts for different situations which can pay varying amounts. Charitable trusts can be used for retirement, meeting educational expenses of children or grandchildren, and for taking care of family members. An annuity trust pays out each year a fixed dollar amount, at least 5% of the initial fair market value of trusts assets. On the other hand, a unitrust pays out a fixed percentage--at least 5%--of the value of the trust assets calculated yearly.

If you would like any information on charitable remainder trusts, or any other form of planned gifts, call Anthony Barclay, Director of Planned Giving, at 601-329-7431.