Charitable Remainder Trust
Grand Junction Estate Planning Lawyer
Another popular estate planning tool for those with large taxable estates is a Charitable Remainder Trust (CRT). A CRT is a form of Irrevocable Trust that is utilized to avoid the capital gains tax on the sale of a highly appreciated asset, e.g. an apartment building, ranch, commercial property, securities, etc. Additionally, the Donor (the person who creates the Trust) realizes a major tax benefit from his donation and receives income from an annuity during his lifetime. And, at the same time the Grantor has the satisfaction of making a substantial gift to his or her favorite charity.
How does a CRT work? First, the Donor transfers the asset to the CRT. Second, the CRT sells it and using the proceeds purchases an annuity for the Donor. When the Donor dies, the balance of the CRT funds is distributed to the charity designated by the Donor in the CRT. As a tax exempt charitable Trust, the CRT is not required to pay capital gains tax on the sale, nor is the Donor responsible for capital gains tax since the property was donated rather than sold.
Kinds of Charitable Remainder Trusts
The Donor has the option of selecting one of two types of CRTs: (1) a Charitable Remainder Annuity Trust (CRAT) which pays a fixed dollar amount every year; or (2) a Charitable Remainder Unitrust (CRUT) which pays a fixed percentage of the entire value of the Trust annually. Another benefit to the Donor is the ability to specify the length of the annuity payout.
If you have a highly appreciated asset and wish to avoid capital gains tax, increase your cash flow, and benefit a favorite charity, a CRT may be a perfect Estate Planning solution for you.
Due to their great potential for tax avoidance, CRT's are examined carefully by the IRS to insure compliance with IRS Regulations and federal laws. Because there are many legal, business, and accounting issues involved, you should consult an experienced Estate Planning attorney and your CPA if you are considering a CRT.
Estate Planning Attorney in Grand Junction
Since 1993 the Law Offices of James A. Littlepage , a Grand Junction Estate Planning firm, has been helping families with large estates to minimize their federal estate tax liability utilizing a Charitable Remainder Trust. Mr. Littlepage has prepared over 2,000 estate plans and recently was recognized with a 2015 and 2016 Five Star Estate Planning Attorney℠ award. In 2014, 2013, 2012, 2011 and 2010 he received the Five Star Wealth Manager℠ award, as seen in 5280 and ColoradoBiz magazines. For assistance in protecting your estate from federal estate taxes, please contact our Grand Junction office for a complimentary 30 minute consultation for estate planning and probate.