To create this plan, you irrevocably transfer cash, securities, or real estate to a unitrust to be professionally managed by Simpson or another financial institution. The trust then pays you an income for life, determined by a fixed percentage you select at the start. Each subsequent year the same process is followed. However, as the value of his trust increases or decreases, so do his income payments. Your income varies with the value of the unitrust, but you receive the same percentage every year, even if the unitrust income is less than that percentage.
Any difference comes from capital gains or principal.
You can choose a unitrust with an income-only option. If the actual income amount is below the stated percentage, you receive only that amount. 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.