Some people who develop an estate plan early find that as the years go by their desires change and they want to adjust their plans to reflect their new goals. Many people, for example, place a much higher emphasis on charitable giving later in lives than they do when they first develop an estate plan after they have children. For many of these people, especially those with a considerable amount of wealth, incorporating a charitable remainder trust, or CRT, is often a good choice. Here’s why.
Asset Transfer
When you create a charitable remainder trust, you transfer some of your appreciable assets to the trust to own. Those assets, such as real estate investments or stock, will then be sold and reinvested at full market price without having to pay capital gains tax on them. This allows you to invest the complete value of the asset and then use that as a way to generate income for yourself.
Income
When you create a charitable remainder trust you direct the trust to pay you a portion of its property as yearly income. While you will have to pay income taxes for the income you receive from the trust, you don’t have to pay estate taxes on the property because the trust owns it instead of you.
Charity
The trust will generate income for you for the remainder of your life. Once you die, the property left over in the trust will then be transferred to the charity of your choice.
Michael Robinson, Estate Planning Attorney
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