When it comes to charity, sometimes doing good means giving stuff away. Sometimes, however, it can be just as good to “give and receive.” Depending on your assets and personal cash flow needs, you might want to consider creating charitable shelter trust.
The various "flavors" of charitable trust are known by some rather silly acronyms, like CRUTs, CRATs, NICRUTs, NIMCRUTs, or Flip CRUTs. Nevertheless, the power behind this veritable alphabet soup of sorts can cut your capital gains taxes or fund your retirement while ultimately benefitting your favorite charities at the expense of the IRS.
The world of the CRUT and all its brothers (and sisters?) is familiar to some, but alien to many. If you among those in need of some background education on this timely subject, then two recent articles from Forbes are worth reading.
The first is titled “Charitable Shelter: How CRUTs Cut Capital Gains Tax.” As this article notes, you can use a CRUT, or Charitable Remainder Unitrust, to cut your capital gains taxes by using the trust to sell highly appreciated assets without triggering any taxation, to provide you with an annual income stream, and then to leave the remainder to charity. After putting a sharp pencil to all of the recent increases in the capital gains tax, and other specific taxes besides, a CRUT can preserve more than 20-30% of the value of an appreciated asset off the top to benefit you and your charities.
For some additional perspective on the use of charitable trusts, consider reading a companion article containing real life stories from Forbes titled “Three Donors Tell Why They Set Up CRUTs”
As you might imagine, choosing the right charitable remainder trust depends a great deal on your assets, your needs, and the likely timespan (i.e., your remaining "lifespan") before the charitable part comes into play. As with all estate planning, this is not a do-it-yourself project.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.For more information about estate planning and to download free tools to help you organize your estate, visit my estate planning website.
Reference: Forbes (August 14, 2014) “Charitable Shelter: How CRUTs Cut Capital Gains Tax”
Forbes (August 14, 2013) “Three Donors Tell Why They Set Up CRUTs”