Skip Ribbon Commands
Skip to main content

Phillips Academy Giving

Charitable Remainder Trust

A charitable remainder trust is an individually managed life income arrangement that offers additional flexibility to donors in terms of the funding assets used to establish the trust and the management of the trust assets. One or two income beneficiaries may receive payments over their lifetimes or over a predetermined term of up to 20 years. In addition to cash or marketable securities, charitable remainder trusts can accept a variety of funding assets including real estate, privately held stock, art, antiques, or other collectible items. Donors may choose their own trustee, or for trust gifts of $100,000 or more, they can select State Street Global Advisors, which manages the majority of Andover’s charitable trusts. Donors may choose between a fixed annuity (charitable remainder annuity trust) or a variable trust managed for growth of income (charitable remainder unitrust).

Charitable Remainder Trust: How it works

  1. You transfer cash, securities, or other property to a trust.
  2. You receive an income tax deduction and pay no capital gains tax.
  3. During its term, the trust pays a percentage of its value each year to you, or to anyone you name.
  4. When the trust ends, its remaining principal passes to Andover.

Example

John and Vanessa Taylor, both age 65, intend to support campus preservation at Andover, but they plan to retire within a year and are concerned about their future income. They own $200,000 in low-basis securities that currently pay 2 percent ($4,000) annually.

Reluctant to realize the capital gains tax they would absorb by selling the stocks and buying higher-paying instruments, they transfer the securities into a 5 percent charitable remainder unitrust, which will pay $10,000 in the first year. They consequently pay no capital gains tax and also get the benefit of a $67,612 charitable income tax deduction. If the trust assets realize an average total return of 8 percent over the years, the Taylors will increase their initial income by 50% within approximately 15 years.

Following their lives, the proceeds from the trust will be directed toward campus preservation, and based upon the same average return of 8 percent and the Taylors’ life expectancies, Andover would ultimately receive a gift of approximately $418,000 toward that purpose.