Charitable Remainder Trusts
12. Unitrust
If you choose the unitrust and receive a percentage of the trust's earnings, the amount of your annual income will fluctuate, depending on investment performance and the annual value of the trust.
The trust will be re-valued at the beginning of each year to determine the dollar amount of income you will receive.
If the trust is well managed, it can grow quickly because the trust assets grow tax-free. So the amount of your income will increase as the value of the trust grows.
Sometimes the assets contributed to the trust - like real estate or a closely held corporation - are not readily marketable, so income is difficult to pay.
In that case, the trust can be designed to pay the lesser of the fixed percentage of the trust's assets or the actual income earned by the trust. Usually a provision is included so that, if the trust has an off year, it will "make up" the difference in income in a better year.