Looking for a Tax Break? Think Charitable Remainder Trust

The Tax Man is coming!  Although structure, scale, and details are not yet known, higher tax rates and fewer deductions are looming on the horizon.  Yet, there are still a few good opportunities for minimizing your taxes.  Today, we’ll focus on one. 

Are you charitably inclined?  Do you have low-basis, appreciated assets?  Do those assets provide little or no income?  Would you like to increase your income and obtain tax benefits at the same time?  If your answers to these questions are yes, a Charitable Remainder Trust might be an excellent solution for you and your family. 

What is a Charitable Remainder Trust?  Very simply, it’s a trust created by you into which you transfer certain property.  One purpose of the trust is to benefit one or more charitable organizations of your choice. 

As those infamous infomercials so often say:  But wait – there’s more!  If you fund the trust with appreciated assets during your lifetime, you’ll receive an upfront income tax deduction, avoid capital gain on the property when it’s later sold, and reduce the value of your taxable estate.  

In addition, you, you and your spouse, or another family member will receive an income stream for life or for a certain period of years.  Upon the death of the last income beneficiary, sooner if specified, the remaining trust property passes to the designated charitable organization(s). 

Finally, it may be possible to replace the value of your charitable gift by purchasing a life insurance policy payable to a family member or other loved one.  This is known as a wealth replacement strategy, and it allows you to obtain various tax advantages without compromising the future financial well being of your loved ones.

Conclusion.  This is a win-win for charities…and the taxpayer!


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