Gene and Carol 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. Gene and Carol are looking for a way to save taxes in this transaction.
Gene: 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 capital gains 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.
Carol: We have always talked about taking part of that stock and buying a vacation home. I have found a very nice summer cottage on a nearby lake. The price is approximately $120,000.
Gene: We checked with our CPA, and he suggested we talk to a gift planner at our favorite ministry. We were happy to discover we could transfer $280,000 worth of the stock into a Charitable Unitrust. The unitrust could then sell the stock tax free.
Carol: We sold $120,000 worth of the stock. The charitable deduction for the unitrust saved enough in tax to more than offset the tax on the $120,000, so the full $120,000 was available to purchase our lake home.
Gene: This was a wonderful arrangement. I am pleased we were able to set up the unitrust. We helped further the cause of the ministry we love, will receive income from our unitrust for the rest of our lives and are enjoying our lake home.
Please note: The story, names and image above represent an example of the benefits of this type of estate-planning tool. They do not represent actual donors to GFA.
You may want to click here to calculate your benefits based on your particular situation and wishes.
GFA's charitable unitrusts are administered by WaterStone and can be funded with cash, securities or real estate with a minimum value of $100,000. Income payments from a charitable unitrust may be received quarterly or annually.