Time for the Charitable Remainder Trust to Make a Comeback

With the very real possibility that capital gains will be taxed at ordinary income rates for those making $1,ooo,ooo or more, it is time to consider the charitable remainder trust again.  A charitable remainder trust (CRT) is a split-interest trust, with the grantor receiving an income interest and charity receiving the remainder.  If you have a highly-appreciated asset, placing the asset in the CRT before the sale will allow you to defer the tax on the sale.  Taxes are paid on the distributions you receive from the trust.  Advanced structures of the CRT permit deferral for a long period of time.  With a 39.6% tax rate and market returns, it is very possible that you will do much better with the CRT than selling the asset and paying the tax.  If you are in a state with an income tax, the benefit is even greater.  And, of course, you will be making a significant gift to charity at termination. Depending on insurability, you can use some of the income tax savings to purchase life insurance to replace the amount passing to charity, if desired. And there is now an established market for the sale of income interests in CRTs, so, if circumstances change and you need to terminate the CRT, you can do so. You can also roll over your CRT into a new one if you like the CRT and want to continue the deferral.    

About Grady Dickens

I created this blog to comment on items of current interest regarding trusts, estate planning, charitable planning and tax law, and share my knowledge and over thirty years of experience as an attorney practicing in Dallas, Texas.