Solutions for Large Donations

The Advantages of a Charitable Remainder Trust

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If you have built a sizeable estate and also are looking for ways to receive reliable payments, consider a charitable remainder trust.

These types of gifts do offer you tax benefits and the option for income. There are two ways to receive payments and each has its own benefits:

The annuity trust pays you, each year, the same dollar amount you choose at the start. Your payments stay the same, regardless of fluctuations in trust investments.

The unitrust pays you, each year, a variable amount based on a fixed percentage of the fair market value of the trust assets. The amount of your payments is redetermined annually. If the value of the trust increases, so do your payments. If the value decreases, however, so will your payments.

Learn more by viewing our Charitable Remainder Trust fact sheet.

An Example From Penn State

Paul and Eleanor ChaddertonPaul '09h and Eleanor Chadderton are helping prepare the leaders of tomorrow at Penn State through a charitable lead trust they created to support Penn State Shenango in 2010.

"As a father of two Penn State graduates, a business owner, and an active member of the community, I have seen firsthand the important role the University plays in our area," explains Mr. Chadderton, retired owner and president of Chadderton Trucking, Inc., in Sharon, Pennsylvania, and a member of the Penn State Shenango Advisory Board. "Kids need more education today than when I was young, and it's only getting harder for them to find the money to afford it. Eleanor and I are trying to do whatever we can to help."

The Chaddertons' charitable lead trust, created through a gift of $500,000, is providing a $20,000 annuity to Penn State Shenango for ten years. Although the trust's first distribution was only recently received by the campus, it has already provided $15,000 in scholarship support for students. The remaining $5,000 of this year's gift was used to partially fund an interdisciplinary spring break service trip in March, which sent fourteen students to Urubamba, Peru, to help indigenous families replace their kitchens' traditional open-pit fire with with clean-burning stoves and chimneys. Because the gift provides unrestricted support, it can be used at the discretion of the chancellor for the greatest needs of the campus each year.

The Chadderton's charitable lead trust will continue to create exceptional educational opportunities for students at the Shenango campus for the next ten years. At that time, the trust's remaining assets, including any appreciation, will be transferred to the couple's beneficiaries at a reduced tax cost.

Read the full story on the Chadderton's gift.

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Next Steps

  1. Contact Michael J. Degenhart at 888-800-9170 (toll free) or giftplanning@psu.edu to talk about supporting Penn State by setting up a charitable remainder trust.
  2. Seek the advice of your financial or legal advisor.
  3. If you include Penn State in your plans, please use our legal name and federal tax ID.

Legal Name: The Pennsylvania State University
Address: c/o Office of Gift Planning, 214 The 103 Building, University Park, PA 16802
Federal Tax ID Number: 24-6000-376

A charitable bequest is one or two sentences in your will or living trust that leave to Pennsylvania State University a specific item, an amount of money, a gift contingent upon certain events or a percentage of your estate.

an individual or organization designated to receive benefits or funds under a will or other contract, such as an insurance policy, trust or retirement plan

"I, [name], of [city, state, ZIP], give, devise and bequeath to Pennsylvania State University [written amount or percentage of the estate or description of property] for its unrestricted use and purpose."

able to be changed or cancelled

A revocable living trust is set up during your lifetime and can be revoked at any time before death. They allow assets held in the trust to pass directly to beneficiaries without probate court proceedings and can also reduce federal estate taxes.

cannot be changed or cancelled

tax on gifts generally paid by the person making the gift rather than the recipient

the original value of an asset, such as stock, before its appreciation or depreciation

the growth in value of an asset like stock or real estate since the original purchase

the price a willing buyer and willing seller can agree on

The person receiving the gift annuity payments.

the part of an estate left after debts, taxes and specific bequests have been paid

a written and properly witnessed legal change to a will

the person named in a will to manage the estate, collect the property, pay any debt, and distribute property according to the will

A donor advised fund is an account that you set up but which is managed by a nonprofit organization. You contribute to the account, which grows tax-free. You can recommend how much (and how often) you want to distribute money from that fund to Penn State or other charities. You cannot direct the gifts.

An endowed gift can create a new endowment or add to an existing endowment. The principal of the endowment is invested and a portion of the principal’s earnings are used each year to support our mission.

Tax on the growth in value of an asset—such as real estate or stock—since its original purchase.

Securities, real estate, or any other property having a fair market value greater than its original purchase price.

Real estate can be a personal residence, vacation home, timeshare property, farm, commercial property or undeveloped land.

A charitable remainder trust provides you or other named individuals income each year for life or a period not exceeding 20 years from assets you give to the trust you create.

You give assets to a trust that pays our organization set payments for a number of years, which you choose. The longer the length of time, the better the gift tax savings to you. When the term is up, the remaining trust assets go to you, your family or other beneficiaries you select. This is an excellent way to transfer property to family members at a minimal cost.

You fund this type of trust with cash or appreciated assets—and receive an immediate federal income tax charitable deduction. You can also make additional gifts; each one also qualifies for a tax deduction. The trust pays you, each year, a variable amount based on a fixed percentage of the fair market value of the trust assets. When the trust terminates, the remaining principal goes to Penn State as a lump sum.

You fund this trust with cash or appreciated assets—and receive an immediate federal income tax charitable deduction. Each year the trust pays you or another named individual the same dollar amount you choose at the start. When the trust terminates, the remaining principal goes to Penn State as a lump sum.

A beneficiary designation clearly identifies how specific assets will be distributed after your death.

A charitable gift annuity involves a simple contract between you and Penn State where you agree to make a gift to Penn State and we, in return, agree to pay you (and someone else, if you choose) a fixed amount each year for the rest of your life.

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