Two basic types of charitable remainder trusts qualify for federal tax benefits. In both arrangements, a donor gives stock, cash, or other assets to a trust. Those assets are invested, producing income for the donor - or other beneficiary - either for a fixed period of time or until the donor dies. The donor is allowed to claim a tax deduction for the estimated portion of the assets that will ultimately come to Duke. When the donor dies, Duke keeps all remaining assets.

The two types of remainder trusts are Unitrusts and Annuity Trusts. Under a basic Unitrust, the donor receives one or more yearly payments equaling a fixed percentage of the value of the asset, which is assessed each year. Under a net-income unitrust, the donor receives only the income earned by the trust, even if the trust earns less than the payout rate. However, the trust can be set up to include a "make-up provision," which allows the donor to make up the lost income, provided the trust earns more than the payout rate in future years.

Under an Annuity Trust, the donor receives a yearly fixed payment equaling at least 5% of the value of the asset at the time the deferred-giving agreement was signed.

By making Charitable Remainder Trusts, donors can get income-tax deductions and escape capital-gains taxes. Many donors find the trusts an appealing way to prepare for retirement. The assets can be invested to earn a lower rate of return when the donor is younger and then shifted to earn a higher rate of return, and thus provide more income during the donor's later years.

For more information on Charitable Remainder Trusts, please contact the Office of Gift Planning at (919) 681-0464 or visit http://www.giftplanning.duke.edu.