Charitable Remainder Trusts (CRTs) have been available for estate planning since 1969. This strategy can be an effective way to reduce tax burden, increase income, and benefit your preferred charitable organizations at the same time.
How Charitable Remainder Trusts Work
Through a CRT, you can choose an appreciated asset to transfer into an irrevocable trust. This move takes the asset away from your estate, which means that no estate taxes will need to be paid when you pass away. At the same time, you receive an immediate tax deduction.
Next, the trustee sells the asset, getting the full market value without the need to pay capital gains tax. The proceeds are reinvested into other assets that produce income. Then, you receive money from the trust for the rest of your life – helping to support your retirement lifestyle. When you die, the remaining assets in the trust are transferred to the charity (or multiple charities) of your choice.
Financial Benefits of CRTs
Why go through the process of setting up a CRT instead of just selling the assets yourself for reinvestment? CRTs offer the benefit of reduced tax burden, which means there will be more income available for you. At the same time, you feel good knowing that the remainder of the trust goes to a good cause after you are gone.
The trust can be organized to send you a fixed percentage of the assets going forward. Or, you might choose a fixed income instead – which means that your income remains consistent, regardless of the trust’s performance.
To benefit from these tax advantages, it is essential that you maintain the proper administration of the trust. You can name yourself as the trustee, with another trustee in line if you are no longer able to manage the trust yourself.
Professional Services for Trusts and Estate Planning
The best way to leverage your retirement strategy to the fullest is by choosing an estate planning team you can trust. Professional services are important for protecting your assets and minimizing the tax burden for yourself and your beneficiaries.
If you need help with estate planning, then Miles & Hatcher, LLP is here to assist. Call us for a complimentary quote and to learn about available services: (909) 481-4080.