The Challenge is An Opportunity
Using Charitable Remainder Trusts -- The last GREAT tax planning tool!
Do you have highly appreciated assets in your portfolio, such as real estate or stock?
Are you aware that all depreciation on real estate claimed on your tax return in previous
years must be recaptured upon sale or death of the owner at a 25% (yes, no
capital gains treatment) flat tax rate? Then, at death, the remaining value is taxed in
your estate at high confiscatory tax rates! This is known as the ultimate double tax
Would you like to increase your income without incurring capital gains tax or painful
depreciation recapture and reduce current income tax at the same time?
Would maximizing your estate to your heirs while leaving a substantial charitable gift
to a worthy cause or institution be appealing?
A Charitable Remainder Trust can convert your highly appreciated assets into a lifetime
income source without generating capital gains or estate taxes. Additionally, one or more
charities you select will benefit from your donation. By establishing a Charitable
Remainder Trust you will accomplish the following:
What is a Charitable Remainder Trust
The Tax Reform Act of 1969 formulated the Charitable Remainder Trust, an irrevocable
tax-exempt trust available in annuity or unitrust formats. Properly structured, such
trusts let you maintain control of the underlying investments, the amount and timing of
income and the organizations that will benefit from your charitable gift. Some limitations
Sell Any Asset You Own Tax Free.
The beauty of the Charitable Remainder Trust (CRT) starts with the tax free nature of
the Trust. Assets left inside the CRT after the death of your all income beneficiaries or
whenever the income is planned to stop, become the property of a tax free entity, or
charity. Accordingly the IRS allows most all assets, income and gains occuring within the
trust to accrue tax free,...with no Federal, State or witholdings of any kind. Therefore,
if you contribute assets to a CRT and then have them sold, reinvested, loaned, generating
dividends, interest and even more gains,...they occur TAX FREE under the shelter afforded
by the charitable entity. Once more, if the CRT is set up correctly, YOU and/or other
persons selected by you remain in charge of the assets and all investment decisions
related to assets within your CRT.
Generate Income Over Your, Your Spouse's,
Your Kid's Even Your Grandkid's Lifetimes.
Once your highly appreciated assets have been sold tax free by the trust, the proceeds
can be reinvested and managed by your and/or other money managers of your choice. The
gains, dividends and interest all continue to compound annually within the Trust without
taxation, similar to an IRA or pension plan. When you and your heirs take income out of
the trust it is taxable to the recipient at that time. The rate and the manner in which
you and other potential trust income recipients take income from the trust is set at the
time of the formation of the trust,...so you really need to become informed as to the
income generation characteristics of the two major CRT types,...CRT Annuity Trusts and CRT
Unitrusts. Annuity trusts are by definition set to pay out a fixed percent of the
original contribution, usually 6% to 12% annually, regardless of what the assets
within the trust earn year to year. Under the Unitrust method the same percentage is
distributed annually (or monthly, etc.) but it is a percent of the year end trust value so
that if your assets continue to increase then your income will increase over time or will
decrease if the assets end up decreasing from year to year. With minor or other low tax
bracket income recipients now collecting periodic trust distributions, the "income
splitting" opportunities are significant and compelling.
Obtain a Tax Deduction,...Not
a Tax Liability.
When you transfer assets to a Charitable Remainder Trust you are allowed an income tax
deduction equal to the present value the IRS calculates and assumes will be left in the
trust by the time of the death of your last chosen income beneficiary. The variables in
this present value calculation include the life expectancies of your trust beneficiaries,
the annual percentage rate and method at which income will be paid out to you and your
chosen trust beneficiaries, and the Applicable Federal Rate in effect for the month you
make any contributions to the Trust.
Obviously, the shorter the life expectancies or time period for the income and
especially the lower the rate of income distribution then the greater the amount that is
likely going to be left over when the trust terminates and assets are turned over to the
charity, school or foundation. This produces a higher eventual gift and hence an allowable
tax deduction in the year assets were put into the CRT.
Similarly, if a high payout, long life expectancies and trust type are calculated to
leave little to the charity once the trust stops paying out income to beneficiaries, then
little or no tax deduction could result. Under this method, the tax free liquidation of
assets, high long term income stream and additional planning and estate considerations
become the payoff,...not the tax deductions.
Don't forget, all the while, when transferring assets into a tax exempt CRT the donor
is probably reducing the size of his or her estate and thereby eliminating a second tax,
the estate tax. Elderly citizens need also be aware of additional Medicaid eligibility
advantages arising from removing assets from their estates.
Find Out If A Charitable Remainder Trust
Is Right For You.
- Charitable Remainder Trusts are sophisticated and require special legal, accounting and
tax administration in order to realize their full potential and endure Alternative Minimum
Tax tests. We can assist you in bringing together all the necessary professionals or can
work in tandem with additional legal and tax advisors of your own to review your situation
and determine if a Charitable Remainder Trust is right for you. The next step is
yours,...you may contact us by phone, fax or Email. If you would like to deepen your
initial study of this planning technique simply Click Here to
obtain our complimentary customized CRT illustration and data sheet. We will get back
to you within one week with a complete hypothetical report. This report allows you to
begin to review a variety of the benefits of employing a CRT with your specific assets and
illustrated to your particulars.
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