A Unitrust refers to a trust from which a fixed percentage of the net fair market value of the trusts assets valued annually, is paid each year to a beneficiary. In these trusts, the donor transfers property to a trust after retaining the right to receive payments from the trust for a specified term. Once the term ends, the trust estate is paid to a public charity designated by the donor. During a unitrust's term, a trustee invests the unitrust's assets and pays a fixed percentage of the unitrust's current value, as determined annually, to the income beneficiaries. If the unitrust's value goes up, its payout increases proportionately. Likewise, if the unitrust's value goes down, the amount it distributes also declines. Payments must be at least five percent of the trust's annual value and are made out of trust income, or trust principal if income is not adequate.
Nebraska Charitable Remainder Unit rust (CUT) is a type of trust commonly utilized for charitable giving purposes. It offers donors the opportunity to make a significant impact on charitable organizations while also receiving income and tax benefits. A Nebraska CUT functions by allowing individuals, referred to as "granters," to transfer assets such as cash, real estate, or highly appreciated securities into the trust. These assets are then managed by a qualified trustee who invests them to generate income. The granter and possibly also their spouse, receives a specified percentage of the trust's value as income for a predetermined term, which can be their lifetime or a set number of years. One of the primary benefits of establishing a Nebraska Charitable Remainder Unit rust is the potential for income tax savings. When granters contribute appreciated assets to the trust, they can avoid immediate capital gains tax liability on the transferred assets. Additionally, they may also receive a charitable income tax deduction based on the present value of the charitable remainder interest. There are two main types of Nebraska Charitable Remainder Unit rusts: the Charitable Remainder Annuity Trust (CAT) and the Charitable Remainder Unit rust (CUT). While the main principles of these trusts are similar, they differ in terms of income distribution. A CAT pays a fixed annuity amount to the granter(s) each year, regardless of the trust's investment performance. Conversely, a CUT pays a percentage of the trust's net fair market value, which may fluctuate depending on the trust's investments. Furthermore, donors have the flexibility to choose the charitable organizations they wish to support with the remaining trust assets once the initial income payments have been made. These organizations can be public charities, private foundations, or other qualified charitable entities. Nebraska Charitable Remainder Unit rusts can be an effective philanthropic planning tool for individuals looking to support charitable causes while still maintaining financial security for themselves and their loved ones. By exploring the various options and working closely with an experienced estate planning attorney or financial advisor, individuals can customize a Nebraska CUT to align with their charitable intent and specific goals.
