Charitable Remainder Trusts

Boardman HallWith an irrevocable trust, a donor or a loved one can receive a fixed annual income or an income that varies with the value of the trust. At the death of the last income beneficiary, the assets in the trust are distributed to the Foundation to be used as designated by the donor. Trusts may be funded by gifts of cash, securities or real estate and can frequently help donors solve a particular problem or meet an important objective:

  • To increase income through the conversion of low yielding highly appreciated assets.
  • To generate a significant income tax charitable deduction and/or reduce potential estate tax exposure.
  • To diversify an investment portfolio with professional management.
  • To reduce or eliminate capital gains tax exposure
  • To make a gift to benefit the University of Maine that might not otherwise be possible.

Here’s how:

With the help of appropriate advisors, you transfer property (cash and/or other assets) to a trust that is created under applicable state and federal laws. You may specify that payments from the trust be made to you and/or one or more other persons for life. Alternatively, you may choose to receive income for a period of time up to 20 years, or certain combinations of lives and terms of years. The amount of income received may be fixed at the time the trust is created or the trust can be created in such a way that the income can fluctuate over time with the performance of the assets in the trust. At the end of the trust period, the property remaining in the trust becomes the property of the University of Maine Foundation for the purposes you designate. Because property transferred to the trust will be used for charitable purposes in the future, gift, estate and income tax deductions equal to the value of the gift portion of the trust are allowed in the year of the gift.

  • EXAMPLE:
    Mr. and Mrs. V., ages 61 and 62, are planning to retire in a few years. They own substantial amounts of securities that they have acquired over time. The securities are worth more than they paid for them, but yield little or no income. Deciding that they would like to convert the securities to income-producing assets, they explore selling the holdings, but learn that they will owe capital gains tax on the entire increase in value, leaving less to invest for more income. They use a portion of their securities to fund a charitable remainder trust. The trust can sell the assets, pay no capital gains tax at the time of the sale, and reinvest the entire net proceeds in a way that will yield tax-favored payments. They are entitled to a charitable income tax deduction in the year of the gift and are assured that the amounts placed in the trust will be removed from their estate for estate tax purposes. Mr. and Mrs. V. have provided for management of their assets should they become incapacitated in later years and gained great satisfaction in having funded a scholarship fund for University of Maine students.

The University of Maine Foundation has professional giving officers ready to work with you and your advisors. We may be reached Monday-Friday between the hours of 8 am and 5 pm by calling 1-800-982-8503 or via email at umainefoundation@maine.edu.