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T&E TALK: Tax Planning with CRTs

Posted by Marco Svagna, CPA on Oct 19, 2015 7:00:00 AM

Having a charitable remainder trust (CRT) as part of your estate plan can help ensure your financial future while allowing you to make a charitable donation.  How does a CRT work?

A CRT pays an amount to you annually, for a given term, some of which, generally, is taxable.
At the end of the term, the CRT's remaining assets pass to one or more charities.
When you fund the CRT, you receive an income tax deduction for the present value of the amount that will go to charity.
The property is removed from your estate.

A CRT can also help diversify your portfolio if you own nonincome-producing assets that would generate a large capital gain if sold. Since a CRT is tax exempt, it can sell the property without paying tax on the gain at the time of sale. The proceeds from such a sale can then be invested in a variety of stocks and bonds by the CRT. When you receive CRT payments, you'll owe capital gains tax. However, much of the liability will be deferred, because payments are spread over time.

You can designate someone either than yourself as the income beneficiary, or arrange to fund the CRT at the time of your death. However, the tax consequences will be different.

If you have questions about whether a CRT should be part of your estate plan, please contact us.

Marco Svagna, a tax partner at Berdon LLP, advises high net worth individuals and family/owner-managed business clients on estate and income tax issues, succession and financial planning, and other matters relating to the preservation of wealth.

Topics: T&E TALK

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