Charitable Remainder Unitrust Net Income and "Flip" Unitrust Retirement Unitrust Charitable Remainder Annuity Trust Wealth Replacement Trust Pooled Income Fund Gift Annuity Deferred Payment Gift Annuity

Occidental offers several ways for you to make a gift and actually have income paid to you or those you wish to provide for in the future. These gift opportunities make it possible for you to receive lifetime income from a charitable gift. Occidental receives the funds only upon your death or after a designated period of time.

These gifts work as follows: Cash, securities, real estate, or other assets are irrevocably transferred to Occidental. You, or beneficiaries named by you, then receive income for life or for a designated period of years. In most cases, the income is paid at least annually, though some plans allow you to defer payment to a time when it may be more advantageous to you (such as retirement). You receive an immediate income tax deduction based on the value of the gift that the College will ultimately receive when all payments have ceased (the “present value” of the gift).

When the beneficiaries’ income interest ends, the assets distribute to Occidental College. The proceeds will then be used in a manner set forth by the donor. 

Charitable Remainder Unitrust

“Occidental charitable remainder unitrusts are a win-win situation,” Marie concludes with a smile. “I can’t say enough about them!” More >

This standard unitrust is a separately created and invested trust offering you a fixed percentage return. The income is based on a percentage (not less than 5 percent) of the market value of the trust’s assets valued annually. Your annual income payments will fluctuate each year. By revaluing the trust annually, your income payments may grow if the trust increases in value, and thereby provide a hedge against inflation. Unitrusts can have multiple income beneficiaries. Additions to a unitrust can be made at any time, thus increasing its income potential. Unitrusts may be established with a minimum of $50,000, with additions of as little as $5,000 allowed.   

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Net Income and “Flip” Unitrusts

A net income unitrust is similar to the standard unitrust except that each year it pays a stated percentage or the net income earned from the trust, whichever is less. These trusts may include makeup provisions, which allow deficiencies (years when trust income is less than the stated percentage) to accumulate and to be made up in subsequent years if the trust’s net income exceeds the stated percentage.

Net income unitrusts with makeup provisions are often used when the trust is funded with real estate or non-income-producing property that must be sold in order to provide for any payout. In this scenario, you still have the ability to convert a net income unitrust to a standard unitrust.

Net income unitrusts can be written with a provision enabling the unitrust to “flip” to a standard unitrust once the asset has sold. Standard unitrusts pay you a straight percentage of the unitrust’s assets annually, irrespective of the net income earned by the unitrust. Generally, when a net income unitrust “flips” to the straight percentage method, this becomes effective at the unitrust’s next annual valuation period.   

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Retirement Unitrust

The retirement unitrust combines the benefits of a unitrust and a pension plan. Individuals may obtain a current tax deduction, avoid capital gains tax on transferred appreciated property, and earn tax-free growth on trust assets, while deferring some or all of the trust income until retirement and ultimately making a significant gift to Occidental.

It works like this: You make a one-time or repeated contributions to a net income unitrust. You receive a tax deduction for the value of the gift that Occidental will ultimately receive each time you contribute to the trust. If you contribute appreciated assets, they may be sold and reinvested with no capital gains tax. Trust assets are invested for growth and grow tax-free. Upon retirement the net income trust is “flipped” to a standard unitrust and the investment strategy changed to provide more income. You may select from various payout options at the time you create the trust. At the end of the beneficiaries’ lifetimes, the trust corpus passes to Occidental College without probate costs.

Summary of Unitrust Features and Benefits

• You receive regular income payments from the trust.
• Unitrusts can provide for more than one income beneficiary.
• Trusts can be written for life or for a term of up to 20 years.
• You enjoy the gratification that comes from supporting Occidental during your lifetime and can direct the purpose of your gift.
• Professional management offers a flexible investment policy and diversification.
• A grantor may add additional assets at any time.
• A non-income-producing asset may be used to fund a net-income charitable remainder unitrust, which in turn may be invested to generate increased income.
• Net income unitrusts can be written with a “flip” provision to provide a standard straight percentage payout option to beneficiaries in the future.
• Unitrusts provide donors with potential tax deferred growth of trust assets and a hedge against inflation; trust assets are revalued annually when computing the annual payments to the income beneficiary.
• There is no capital gains tax on the transfer of appreciated assets to the trust, and the charitable remainder trust is able to sell the assets without paying capital gains. As a result, the full fair market value is reinvested for your benefit.
• You receive an immediate income tax deduction based on the value of the gift Occidental will ultimately receive.
• You benefit from a probable reduction of estate taxes and probate costs.

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Charitable Remainder Annuity Trust

The annuity trust is a separately created and invested trust offering a fixed amount of income annually. The fixed dollar amount, which cannot be less than 5 percent of the fair market value of the assets originally placed in trust, is determined in the year the trust is established and will be the same amount paid annually for the life of the trust. Annuity trusts may be established with a minimum of $50,000. No additional gifts may be made to the trust once it is established.

Summary of Features and Benefits

• The trust pays a fixed dollar amount every year.
• Annuity trusts can provide for more than one income beneficiary.
• Trusts can be written for life or for up to 20 years.
• You enjoy the gratification that comes from supporting Occidental during your lifetime and can direct the purpose of your gift.
• Professional management offers a flexible investment policy and diversification.
• There is no capital gains tax on the transfer of appreciated assets to the trust, and the charitable remainder trust is able to sell the assets without paying capital gains. As a result, the full fair market value is reinvested.
• You receive an immediate income tax deduction based on the value of the gift Occidental will ultimately receive.
• You benefit from a probable reduction of estate taxes and probate costs.

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Wealth Replacement Trust

Wealth replacement trusts may be ideal if you wish to establish a charitable remainder trust with the College but are concerned that the transfer of assets may deprive your children of a portion of their inheritance. This plan involves placing part of the income and/or tax savings generated from the charitable remainder trust into a separate trust. The income and/or tax savings is then used by the separate wealth replacement trust to pay premiums on a life insurance policy.

Your children are made beneficiaries of the trust. At your death, the policy pays the wealth replacement trust, which in turn pays your children. In this way, the amount of your estate passing to charity through the charitable remainder trust is replaced for your children’s benefit through the life insurance.   

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Pooled Income Fund

The Occidental Pooled Income Fund allows multiple donors to pool their gifts, much like a mutual fund.

Your gift of cash, securities or other property entitles you to receive a proportionate share of the fund’s net income each year.

Occidental College maintains two such funds:

Fund C, which has an income objective, and Fund A, which has a balanced income and growth objective, thereby offering a choice between a larger immediate income or an increased future income.

These funds offer the advantage of pooling to obtain size, diversity, and professional investment management by the College. Gifts to the pooled income fund require a minimum investment of $10,000, with additions of as little as $5,000 allowed.

Summary of Features and Benefits

• Pooled income funds provide donors of moderate-size gifts the protection of diversified investments.
• Pooled income funds offer a hedge against inflation.
• You may add to the fund at any time.
• You receive a charitable deduction for the value of the gift the College will ultimately receive.
• There is no capital gains tax on the transfer of appreciated assets to the fund, and the pooled income fund is generally able to sell the assets without paying capital gains. As a result, the full fair market value is reinvested for your benefit.
• You receive a probable reduction of estate tax and probate costs.
• You receive quarterly income payments from the fund.

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Gift Annuity

Growing up on Escarpa Drive near the Occidental campus, Constance (Karge) Jackson ’49 fondly recalls playing Robin Hood with the neighborhood kids among the College’s oak groves. More >

The gift annuity offers guaranteed fixed payments to you for life. It can be established for one or two individuals. These gifts are the simplest form of gifts that pay income and are arranged as a contract between you and Occidental. A portion of your payments are tax-free, part are ordinary income and, if funded with appreciated property, part are treated as capital gains income. Depending upon your income tax bracket, this can be a very attractive gift option.

Your income tax deduction is based on the amount of your gift, the ages of the beneficiaries and the income you receive. Gift annuities may be established at Occidental College for a minimum of $10,000. Since each annuity is a separate contract, no additions are allowed. However, you may establish as many as you like. The rates depend on your age and can be very attractive.

Your life income payout is based upon your age. The older the life income beneficiary, the higher the payout rate. A 70-year-old may receive a 7.8 percent payout while a 90-year-old may receive 12 percent. Samples of our latest single-life and two-life gift annuity rates can be found at the back of this guide.

• Sample Gift Annuity Rates

Summary of Features and Benefits  

• You receive payments at least annually.
• Your fixed-dollar income is guaranteed for life.
• Income is based on the age of the beneficiaries.
• When appreciated assets are used to fund a gift annuity, a portion of the capital gain is generally prorated over the projected life of the annuity.
• A portion of the income is tax-free over the expected life of the gift annuity.
• A charitable deduction is allowed for the present value of your gift to Occidental College.
• Gift annuities allow you to reduce estate taxes and probate costs.

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Deferred Payment Gift Annuity

This is the ideal gift for younger donors who wish to make a gift now and secure a charitable income tax deduction in high earning years; they can defer payments until retirement or some future date when they have greater need for the income. You may purchase a deferred gift annuity from Occidental in the same manner as a regular gift annuity. Because the payment is deferred, the annuity rate is compounded so that the eventual payout will be significant in relation to the original gift invested. Deferred gift annuity rates are considerably higher than regular gift annuity rates. Please call the Office of Gift Planning if you are interested in learning more about our Deferred Gift Annuity Rates.

Summary of Features and Benefits  

• You receive payments at least annually once they begin.
• Your fixed-dollar income is guaranteed for life.
• Income is based on the age of the beneficiaries and the length of the deferment until payments begin.
• A portion of the income is tax-free over the expected life of the gift annuity.
• A charitable deduction is allowed immediately for the present value of your gift to the College.
• You enjoy favorable capital gains treatment and deferral of capital gains until the date the annuity begins if appreciated assets are used to fund the annuity.
• Deferred payment gift annuities help you to reduce estate tax and probate costs.

To learn more about these deferred gift opportunities and the Ben Culley Society, please contact the Office of Gift Planning at 800-448-2699.

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This information is provided with the understanding that Occidental College is not engaged in rendering legal, accounting, or other professional advice and assumes no liability whatsoever in connection with its use.  Because tax laws are constantly changing and are subject to differing interpretations, we urge you to consult your tax and financial advisors before acting on the information contained herein.

 

Last updated:01/23/08