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Charitable Remainder Trust - FIT Video - YouTube
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(upbeat music)
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- Welcome to the FIT Video Series,
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financial instruction and teaching
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brought to you by Syverson Strege,
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a fee only financial planning
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and investment management firm.
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How would you like to reduce your taxes?
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Increase your retirement
income and benefit
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your favorite charity
all at the same time.
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Syverson Strege explains how
that can be accomplished,
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through a Charitable Remainder Trust.
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- A charitable remainder trust or C R T ,
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is a very powerful tool
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that can be used to help reduce taxes,
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increase retirement income
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and benefit your favorite charities.
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People who may benefit from a CRT,
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include individuals who one,
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are subject to paying
large capital gains taxes
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on appreciated assets,
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two, would like to
maintain an income stream
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from those assets.
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And three would like to benefit charities.
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A CRT is a tax-exempt trust
that can liquidate an asset
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to create two interests,
an income interest
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and the remainder interest.
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The income interest is paid out
to a designated beneficiary,
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often the creator of the trust
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or the creators family members
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for a set period of time
or for an entire lifetime.
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At the end of the trust
term, the remainder interest,
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the remaining assets in the trust
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are passed to the creators
charities of choice.
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My colleague Jerin will
now share information
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about the benefits and potential
income derived from a CRT.
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- First appreciated assets are
transferred into the trust.
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There are many types of
assets that can be used,
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including appreciated shares
of stock, assets of a business
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or even farm machinery.
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In the case of farm machinery,
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often it has been depreciated
over several years,
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so if sold outright,
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would be subject to
ordinary income tax rates.
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However, if the machinery is sold
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under the tax umbrella of the CRT,
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there will be no immediate
taxes due on the sale.
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In the case of appreciated assets or cash,
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the creator of the trust
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would also receive a very large
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charitable income tax deduction,
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in the year the trust is created.
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This is because a percentage
of the assets transferred,
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will eventually pass to charity
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at the end of the trust term.
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In these cases, if the individual
sold the assets business
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or farm machinery first
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and then gave the money to a charity,
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they would have to pay taxes on the sale
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and would not have the
benefit of annual income.
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In regard to income,
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the creator of the trust
specifies in the trust document,
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the percentage or the amount of income
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that the trust will pay out annually
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to the income beneficiary,
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which is often the creator's family.
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The amount of income that
can be paid out is flexible
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and is often stated as a
percentage of the assets,
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such as five to 10% annually.
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For example, if a person had
$250,000 in assets in their CRT
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and chose a 10% distribution,
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they would initially receive
an annual income of $25,000.
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One nickname for this income stream
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is a Charitable Pension Plan
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because the creators of the
trust can receive income
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much like a pension for the
remainder of their lives.
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One potential additional tax benefit
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is that amounts transferred to a CRT
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are not generally subject
to gift or state taxes.
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Therefore, people with large estates,
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subject to the estate tax,
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could help reduce these
taxes by creating a CRT.
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- Finally, at the end of the trust term,
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which is often at the time
of death of the creators,
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the remaining trust
assets passed to charity.
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At the time, the trust was established,
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the creator specified
their favorite charities
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to be the remainder beneficiaries.
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Flexibility exists to
change the charities,
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after the trust is established
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by naming a donor advised fund,
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as the remainder beneficiary.
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As you can see, the
Charitable Remainder Trust
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can be a powerful tool, to help
achieve your financial goals
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and benefit you, your family
and leave a lasting impact
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through a charitable gift.
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- Thanks for joining this Fit Video.
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If you'd like to see how
Syverson Strege can help you
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with this topic or other
financial planning needs,
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contact us for a free,
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no obligation, confidential consultation.
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Call (515) 225-6000
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or visit OnlyWorkForYou.com, thanks again.
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