Differences Between an Annuity & a Unitrust

Giving back to your school, church or a registered charity can make you feel good, but when you're starting out you may need those assets to establish yourself. Charitable annuities and unitrusts allow you to do both, giving you an annual income while making a contribution to the charity of your choice. Although they have similarities, they also have key differences.


With a charitable annuity, you make a gift of cash, securities or other property to a trust. The trust, in turn, will pay annual benefits to you -- or to another beneficiary. This provides you or your beneficiary with a fixed annual income. When the trust ends, the remainder of the trust is given to the charity that you have selected. A charitable annuity can be set to last as long as 20 years, but automatically ends on the beneficiary's death. This can allow you to make a donation that benefits you during your lifetime, but that will be passed on after your death.


As with a charitable annuity, in the case of a charitable unitrust, you transfer cash, securities or other property to a trust. The trust will then pay you or another beneficiary a variable annual income. As is the case in a charitable annuity, after a specified period when the trust ends, the remainder of the trust is passed on to the charity that you have selected. Like a charitable annuity, a charitable unitrust can be set up for as long as 20 years, but it ends when the beneficiary dies.

Annuity Income

The key aspect of charitable annuity income is that it is fixed and predictable. You decide on a reasonable fixed annual income when you establish the trust. The amount is based on the value of the assets when the trust is established. The charitable annuity will pay out the same amount every year -- unless the trust is depleted. This means that you know exactly how much income you will receive from the trust every year.

Unitrust Income

In contrast, charitable unitrust income varies from one year to the next. When you establish the trust, a reasonable income percentage rate is determined. The trust assets are valued each year and you are paid based on the assessed value and the predetermined income percentage. This means that your income will fluctuate with the value of the trust. If the trust increases in value, so will your income, but if the trust decreases in value, your income will fall.

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