Understanding fundamentals about trusts guarantees a better financial future.

Please Note: This information is distributed with the understanding that the author is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expertise is required, the services of a competent professional should be sought. From: A Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers.

Remember when you came into the “store” last month? In that column, I promised to repeat some of the fundamentals of Trusts and what they are. Further, I promised to repeat some brief information about Annuity Trusts and Unitrusts. Well, here it is....

Annuity Trusts and Unitrusts are two basic types of charitable remainder trusts. Each is designed to meet different financial and tax planning goals. The Annuity Trust provides for a fixed sum to be paid annually to the income beneficiary you have designated. The fixed payment is made without regard to the investment performance of the trust. The Unitrust pays the income beneficiary a varying amount based upon the value of the trust’s assets each year. A Unitrust is the most common of the two trusts because it offers more flexibility and protection from inflation to the income beneficiary. Charitable Remainder Trusts are backed only by their own assets, so competent investment management is especially important.

As Charitable Remainder Trusts, both the Unitrust and the Annuity Trust offer a variety of options, and they can be tailored to fit your individual estate, financial, and retirement planning needs. When you create a Charitable Remainder Trust during your lifetime, you are entitled to a charitable income tax deduction; you save income taxes immediately and still receive an income from your assets. If appreciated property is used to fund the trust (securities, real estate, and the like), capital gains tax can be avoided. A gift in trust to the Scottish Rite Foundation, for example, offers you the satisfaction of making a gift during your lifetime while receiving a significant charitable contribution deduction and freeing you from investment worries.

Split-interest Trusts are becoming more popular these days. Here is how they work. Property can be divided in many ways. For example, a piece of land can be divided into separate lots, or a condominium in a resort area can be owned by numerous people in a time-share arrangement. Property can also be divided by separating the future interest (the right to eventually receive the property, sometimes known as the remainder interest) from its present interest (the right to use and enjoy the property now). Trusts that separate the present and remainder interests are known as Split-interest Trusts.

A Charitable Remainder Trust is a type of Split-interest Trust. It enables you to make an irrevocable gift of a remainder interest in property to charity while retaining the right to income from or enjoyment of the property for your lifetime or the lives of other ben- eficiaries. When the trust terminates, the property in the trust will be distributed to the charity to be used as you have specified.

A Charitable Remainder Trust can be established during your lifetime or through your will. This kind of trust can provide lifetime income for a spouse or family member, such as an elderly parent. Many friends and members of the Scottish Rite have chosen to make gifts to our Foundation with Charitable Remainder Trusts rather than through bequests, since a trust often makes possible a much larger gift and can offer significant income tax savings.

I hope this refresher is beneficial to you and your family, and that you seriously start making plans for the financial security of your future. And of course, I trust that when you are thinking of a charity, you will not forget your Masonic affiliations. The Masonic Fraternity, in total, is now giving nearly $2 million per day to charitable endeavors. If you would like more information on trusts and the many options they offer, please drop me a line or phone, and I’ll be more than pleased to offer whatever help I can. Which leaves my “ad” for the month to read:  A refresher course is like cleaning out your closet; you can always find something you can’t live without!

For an investment of securities and/or real estate, please run a calculation and send it to me based on an investment of $__________. Assume the cost basis of the asset (what was originally paid, less depreciation) is $__________.

My birth date is _________________; My spouse’s is _________________.

Name ____________________________ Date _______________________

Address _______________________________________________________

City _________________________ State ________ Zip _______________

Send to: Scottish Rite Foundation, c/o Thomas M. Boles, 1761 East Woodcrest Avenue, La Habra, CA 90631-3260

The Scottish Rite Pooled Income Fund allows you and, if you wish, your wife and/or other beneficiary(ies) to receive a worry-free lifetime income as well as attractive tax benefits by joining the Fund via a financial gift to The Scottish Rite Foundation, S.J., USA. For more information call, 1-800-486-3331 or fax 202-387-1843.

Grand Commander Kleinknecht will personally respond to your inquiry. If he is not available, please leave your name and number, and the Grand Commander will return your call at his earliest opportunity. Through the Scottish Rite Pooled Income Fund, you can do well for yourself and your family while also doing good for others!