Torch, Summer 1984

f; A TAX DEDUCTIBLE SCHOLARSHIP FUND FOR YOUR CHILD OR GRANDCHILD? Robert C. Auckland Director of Planned Giving I am often asked whether a parent or grandparent can create a scholarship fund , making a deductible contribution of assets to Cedarville College , AND designate his or her child or grandchild as the first recipient. Unfortunately, the answer is no. But, there is a way to achieve the same result. Consider this example: A donor transfers $50,000 in appreciated assets to a charitable remainder unitrust, set up for a period of four years . Each year the trust pays the child or grandchild (student) 10 percent of the value of its assets. The donor gets an immediate income tax charitable deduction of approximately $32,800. If the donor is in the 55 percent bracket (state and federal combined), the tax savings amount to $18,040, which means the net cost of the $50,000 transfer to the trust is now only $31,960. Meanwhile, the unitrust which cost $31,960 to fund will pay yearly income to the student at a much lower tax bracket. The annual distribution to the student based on earnings of 7 percent and corpus growth of 5 percent in the tax exempt unitrust are as follows: Year I $5 ,600 Year 3 $5 ,690 Year2 $5,645 Year4 $5,735 The total paid to the student over four years is $22,670, while the cost of the trust was $31,960 . What has the $9 ,290 achieved? By the end of the trust term, the prin– cipal of the trust is worth over $51,000 which is transferred to Cedarville College outright and may be used to fund a permanent scholarship in the family's name. There are several other benefits that accrue to the donor, such as the avoidance of capital gains tax on ap– preciated assets transferred to the trust and the removal of the asset from the estate thereby also avoiding any possible estate tax. Two important goals were met with one financial outlay: 1. The education of the student 2. A substantial charitable gift during the donor's lifetime Before setting up this type of trust, You need to first determine: does this meet my needs? This is only one example of many avenues that are open to you. This same plan can be established in varying amounts and could even be set up several years in advance with small annual contributions to the trust. Please write for your personal copy of the informative brochure, "Living Trusts Can Be Giving Trusts." We will be happy to send it without cost or obligation. D Please send brochure "Living Trusts Can Be Giving Trusts ." D Please send booklet "Giving Through Your Will ." D I/We have already remembered Cedarville College in my/our will. Clip and mail today to: Mr. Robert C. Auckland Director, Planned Giving Cedarville College P.O. Box601 Cedarville, OH 45314