Each subsequent year the same process is followed. However, as the value of his trust increases or decreases, so do his income payments. In the year you create and fund a unitrust, you enjoy a sizable income tax charitable deduction. The deduction is based upon the value of the hospital's 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. His deduction would be calculated on the current market value of the securities instead of their lower cost basis. A life income. A hedge against inflation.