Capital gains tax. Those words can strike dread in the heart of any investor. But what if you could enjoy the fruits of your savvy investing without paying the taxes and help out a charitable organization at the same time? Charities aren’t subject to capital gains taxes, and any proceeds from a sale of property stay in the trust and benefit you.
When you turn over ownership of a non-income producing asset to a charity through a charitable trust, the charity will sell the asset and buy something that will give you an income for years to come.
In order to receive an income from the charitable trust, there are a couple different ways you can set it up. If you choose a fixed annuity, the trust pays you the same income yearly. This can’t be changed once the trust is set up, so make certain you allow for cost of living increases. You can set the amount to be whatever you wish, but remember you will have to pay tax on the income.
The second method sets up a percentage of trust assets income payment. If the trust does well in any given year, your percentage will yield a bigger income for you. The IRS states that you must take at least five percent of the trust value per year.
If you have questions or are interested in setting up a charitable trust, contact an estate planning attorney today.
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