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The Retirement Unitrust

The Retirement Unitrust

Mary grew up on a farm in Henrico County. When her parents passed away, she and her husband Bill inherited the farm.

When Mary was a child, the farm was out in the country. Now that the city has grown, the farm is within the city limits. Several developers would like to build homes on the farmland.

Mary: We received modest payments from the farm over the years, including from a neighboring farmer who rented our land for grazing. Since I inherited the farm from my parents several years ago, the value has greatly increased.

Bill: Since it is a good time to sell, that's what we would like to do. We would also like to invest the sale's proceeds for growth for about 10 years until we retire. However, when we checked with our tax advisor, she told us that if we sold the farm, we would have a huge capital gains tax bill.

Mary: But then she told us about a plan that would provide for our retirement. She explained that we could transfer the land into a special retirement trust. Once inside this trust, the farm could be sold tax free and the cash invested for growth. The proceeds would grow tax free inside the trust until we retire. By the time we retire, the payouts would be taxable, but we could have as much as $900,000 in the trust. She knew we were big supporters of Boys Home and recommended we talk with them.

The people in the development department at Boys Home told us about a special type of charitable remainder unitrust, a retirement unitrust. The retirement unitrust pays out either a fixed percentage of the trust assets each year or the trust income, whichever is lower. Because the trust is invested for growth instead of income, the payments from the trust will remain low while Bill and Mary are still working. This strategy allows the trust to grow in value so that the unitrust can provide greater income to Bill and Mary in retirement.

Bill: We really liked this idea and so we transferred the farm to the unitrust. We now know we will enjoy a very nice retirement. We already have an IRA and are planning to use that for retirement as. With the extra income from this retirement trust, we will be able to travel and really enjoy our golden years. Of course, we are also delighted that the rest of the trust will go to Boys Home after we both are gone.

*Please note: The names and image above are representative of a typical donor and may or may not be an actual donor to our organization.
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