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GiftLaw Pro Home   >  Chapter 5 - Difficult Property Gifts  >  5.1 Debt  >  5.1.3 Unitrust Debt Solutions  >  Basic Quiz

Basic Quiz - 5.1.3 Unitrust Debt Solutions

1. When a donor wishes to use debt-encumbered property to fund a unitrust, the easiest way to do so is to have the donor pay off the debt before the transfer.
           
2. If the donor owns a large piece of debt-encumbered property and would like to fund a unitrust, it is possible to subdivide the property and have the mortgage lender release the debt on part of the property. Then, donor may use the debt-free portion to fund the unitrust.
           
3. When a donor owns several pieces of property and has one debt-encumbered piece that she wants to use to fund a unitrust, the donor can borrow against another piece of property and pay off the debt on the property that she wants to use to fund the unitrust.
           
4. If a donor wishes to fund a unitrust with debt-encumbered property, it would be a violation of the self-dealing rules for the charity to purchase part of the property, thus allowing the donor to pay off the debt.
           
5. If a donor wishes to use the personal guarantee method and transfer the equity in the property to a unitrust, it is advisable to use property that will sell quickly.
           
6. The IRS specifically allows the personal guarantee method.
           
7. In the "part sale to charity" method, it is advisable for the charity to receive part of the property as an outright gift and to also purchase part of the property.
           
8. The personal guarantee method involves a modest amount of risk.
           
9. If property that is to be transferred to a unitrust has a small mortgage on it, then the easiest way to deal with the debt is to have the donor pay it off.
           
10. The release method of dealing with debt-encumbered property involves obtaining permission of the lender to remove the debt on the property that will be transferred into the unitrust.