By Crystal Langdon

www.crystalclearfinances.com 

There are several ways that individuals can continue to provide for their families while financially supporting New Yorker’s Family Research Foundation. These include monthly giving, repositioning of assets, or creating a variety of trusts.

Creating trusts can provide avenues to maximize your tax deductions, eliminate capital gains, and in some cases – secure an income stream for life. In past articles I have discussed the advantages of the Donor Advised Fund and Charitable Gift Annuities. This time I will discuss the advantages of Charitable Remainder Trusts.

Charitable Remainder Trusts (CRT) are generally used for larger, more complex gifts or asset transfers over $100,000. Since they represent a capital gains time bomb for the owner, it is ideal for assets that have appre-ciated over the years. By rolling their assets into a Charitable Remainder Trust, individuals can eliminate having to pay capital gains, receive an imme-diate tax deduction, and in most cases increase their income stream.

Let’s look at an example. Tim is 74 and Julie, his wife, is 72. They worked hard all their life and retired. Their income stream consists of Social Security, pensions, and the income they are receiving from investments they purchased over the years. Both Tim and Julie would like to give more, but unfortunately, they do not have enough. They are not sure what to do. He has 5,000 shares of stock that he purchased at $20 a share, that is now worth $50 a share. It is yielding a 2% dividend. If they sell this asset and try to find something that will produce a larger return, they will have to pay capital gains tax on the entire profit.

Their other option would be to place the appreciated asset (5,000 shares, which are now worth $250,000) into a Charitable Remainder Trust. They would receive an immediate tax deduction of $102,793.00, which was the original purchase price. They can use this for the current year and carry over any excess for up to five years. By opening a Charitable Remainder Trust, Tim and Julie have also eliminated the $150,000 capital gains tax, and they will receive an increased income stream. In fact, current income from the Charitable Remainder Trust would be a 6% return each year, in this case equaling $15,000. Since they were receiving only 2% before, this is a $10,000 annual increase. Tim and Julie could elect to set up lifetime payments, or they could decide upon a fixed percentage of the market value of the trust each year.

Let’s take this one step further and show how the Charitable Remainder Trust can benefit NYFRF. Let’s assume that over the course of years, while Tim and Julie have continued to receive their income stream and the trust has earned 8%, Tim and his wife Julie pass away. Upon their death, the Charitable Remainder Trust would remove the asset from their estate for estate tax purposes, and NYFRF, who is listed as the beneficiary, would receive the residual trust assets of $363,219! That is the power of a Charitable Remainder Trust!

This is a win-win situation. Tim and Julie have been able to increase their lifetime income, eliminate taxes AND give to NYFRF.