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Bridging the Worlds PO Box 9109 Santa Fe, NM 87504 Phone: 505-501-1887
BTW quick guide to Charitable Remainder Trusts.
A Charitable Remainder Trust (CRT) is a way you can:
• Make a substantial donation to a non profit organization • Get a big tax deduction • Create an income producing investment • Avoid substantial capital gains taxes
All at the same time.
The CRT is a way of contributing money you are intending to contribute, and gaining financial benefits from the contribution.
You contribute money, or valuable assets the charity can put into their endowment fund to create income. The charity then shares the proceeds of this investment with you. The charity has received the donation, and you get to take a tax deduction in the year you contribute. Then the charity owes you income for some specified time period, or for life, and you receive this income in a tax advantaged format.
One powerful way to use the CRT:
Let’s say you bought a stock for $3000, and its value has increased substantially to $10,000. If you donate it to charity, you avoid paying the capital gains tax on the $7000 gain, AND you take a charitable deduction for the full fair market value of $10,000. You legally get a double benefit. You have allowed a charity to get $10,000 in benefit from something that only cost you $3000, and you get tax deductions as well. In a CRT, the charity will pay you monthly income as well, from the gains they make on the sale of that stock. The charity can sell it tax free. The benefits you receive may completely or partially offset the cost of donation, yet the charity still gets the working capital it needs.
This can also be done with real estate that has appreciated in value. You can also contribute under-performing investments - assets that aren’t doing well for you, but when contributed will do well for the charity.
The CRT is not primarily an investment. It is primarily a contribution. It’s your opportunity to offer assistance and get benefit in return. If you have a commitment to helping out, this is a way that can benefit you, as well as your cause. The CRT is generally suited to larger donations, and is particularly well suited to contributing your estate, either your entire estate or part of it. The contribution is made, and the tax deduction is taken while you’re still alive, and the trust pays you income while you’re alive as well.
For accurate details about how this works, contact our accounting professional, David Pease, who can answer your questions and get you set up correctly. Tax law changes constantly, so you need a professional to keep you up to date. The CRT has several variations, and should be tailored to your personal financial profile.
email David Pease
David Pease Pease Professional Services 1925 Aspen Drive Santa Fe, NM 87505 (505) 471-3680