AVENUES FOR giving
- University of Hawaiʻi Foundation
2444 Dole Street
Bachman Hall 105
Honolulu, HI 96822 - Phone: (808) 956-8849
Toll Free: 1 (866) 846-4262
Fax: 808-956-5115 - Send email >>
Planned Gifts
Charitable Remainder Trust
Roger Fukumoto owns a $1 million commercial building. At the age of 70, he is ready to retire from the property management business. He, therefore, is contemplating a sale of the building. However, Roger's cost basis is only $100,000 and he is facing a potentially very large tax bill when he decides to sell.
How can Roger sell the property with little or no tax and accomplish some retirement planning at the same time?
Roger elects a "sale and charitable remainder unitrust" (CRUT) option. Based upon his current financial goals, he transfers 70% of the building into a charitable remainder trust. He continues to own the remaining 30% of the building. A few months later the building is sold for $1 million. Pursuant to Roger’s wishes, the charitable remainder trust will receive $700,000 and Roger will receive $300,000.
Because 30% of the building was sold personally by Roger, the $300,000 is subject to capital gains tax. Specifically, Roger will have $270,000 of capital gains ($300,000 - $30,000 prorated cost basis). However, the $700,000 inside the charitable remainder trust will not be subject to any tax upon sale. In fact, it will generate a $320,000 charitable tax deduction that will offset all of Roger's $270,000 of capital gains. Assuming he can use his charitable tax deduction, this plan results in a zero tax sale for Roger!
Finally, Roger will receive a lifetime income stream from his $700,000 CRUT. Based upon a 5% payout, Roger will receive $35,000 this year and, over his life expectancy, may receive over $650,000 from his charitable remainder trust! In summary, Roger will avoid paying capital gains tax, will receive significant retirement income for life, and make a substantial gift to the UH Foundation, to benefit his alma mater.
For more information on charitable remainder trusts, please email giftplanning@uhf.hawaii.edu or contact Lani Starkey at 808-956-8034. We are happy to provide you with a complimentary charitable remainder trust illustration and proposal personalized for your unique situation and objectives.