A Charitable Remainder Trust allows you to convert an appreciated asset
such as stocks or real property, into cash without having to recognize
capital gains tax on the sale. The Charitable Remainder Trust also allows
you to take an income tax deduction at the time of the sale, guarantees
you an income stream for life and reduces estate taxes by having the asset
not included in your estate upon your death. And finally, it also lets
you benefit one or more charities of your choosing.
The use of a Charitable Remainder Trust is quite simple. An Irrevocable
Trust naming yourself as income beneficiary and one or more qualified
charities as remainderman is established. Your appreciated asset is transferred
into this trust. The trustee sells the asset at current fair market value,
paying no capital gains tax, and reinvests the proceeds into income producing
assets. You receive the income for the remainder of your life and upon
your death the remaining trust assets go to the charities. If you are
concerned that your children are not receiving the benefit of the asset
upon your death, you can take the income tax savings and part of the income
you receive and purchase a life insurance policy in an amount equal to
the value of the assets, have your children or a life insurance trust
own the policy and thereby keep the proceeds out of your estate for estate
tax purposes. In this manner you have not only replaced the asset for
your children’s benefit but have also eliminated any estate tax on it.
A Charitable Remainder Trust allow you to secure a life time income, save
taxes and benefit a charity.