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Sale and Unitrust

Sale and Unitrust
Joe and Renée purchased stock in a small medical service company several years ago. The company has done well. A larger company is now discussing the possibility of buying the smaller company. Joe and Renée are looking for a way to save taxes.

Joe: We were fortunate to invest in the medical services company. Over the years, medical services have become more and more important, especially for senior Americans. We thought this stock would grow and, indeed, it has increased in value.

We paid about $50,000 for the stock and it is now worth $400,000. If we were to sell the stock, we would pay a large tax.

It looks like the company may be sold to a larger company. There is no sale agreement yet, but it could happen in the future.

Renée: We had always talked about taking part of that stock and buying a vacation home. I had found a beautiful cabin in the mountains.

Joe: How could we take $120,000 in cash from the value of the stock and not pay tax? We checked with our CPA. He suggested that we talk to a gift planner at our favorite charity. We were happy to discover that we could transfer $280,000 worth of the stock into a special trust called a charitable remainder unitrust. When we transfer the stock into the unitrust, it can then be sold tax free.

Renée: Best of all, we were able to sell the other $120,000 of the stock for cash. The deduction on the charitable trust saved enough in tax so that we did not have to pay tax on the $120,000. The full $120,000 was available to apply to the purchase price of the cabin.

Joe: This was a wonderful agreement. I am pleased that we were able to set up the trust. We now have income from our unitrust and are enjoying our vacation home. We named The Jewish Federations of North America (JFNA) as charitable beneficiary of the trust. Renee's mother was a JFNA board member and active for years in the Federation movement at the national level. Renée and I have directed JFNA to add the trust proceeds to JFNA's Unrestricted Domestic Endowment Fund, which has funded innovative programs such as the Create a Jewish Legacy project, which has produced millions of dollars in expected gifts for the Jewish community. The fund has also supported the Multigenerational Philanthropy Training Program, which has taught development professionals at Jewish Federations and Jewish Community Foundations how to engage grandparents, children and grandchildren in respectful conversations with each other about their values and giving philosophies. Our gift will be a lasting memorial to Renée's mother.

*Please note: The names and image above are representative of typical donors and may or may not be actual donors to JFNA, a Jewish Federation or a Jewish Community Foundation. Since your unitrust benefits under federal rules may be different from this couple, you may want to click here to view a color example of your benefits.

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Any tax consequences described on this page are based on U.S. federal tax law. Charitable deductions from state and local taxes or from Canadian and provincial taxes may not be available to the same extent as from U.S. federal taxes. The Jewish Federations of North America (JFNA) does not provide legal advice. Donors are encouraged to seek independent tax and legal counsel. You may read JFNA's charitable solicitation disclosure statement here and important information about endowment gifts and bequests to JFNA here.