Deficiencies will be made up in later years, when the unitrust income exceeds the stated percentage. This option is attractive, for example, if you want the unitrust to hold some unproductive real estate until it can be sold at the best price and the funds reinvested. In the year you create and fund a unitrust, you get a sizable income tax charitable deduction. This is based upon the value of our right to receive the remainder of the trust assets after your lifetime. The value is determined by official U.S. Treasury average lifetime expectancy tables.
Any excess is deductible over the next five years.
Suppose John used appreciated securities to fund the unitrust. He would pay no tax on the appreciation. In Using This Flexible Plan A unitrust offers many advantages. A life income. A hedge against inflation.