Real Estate Operations

Why a Charitable Remainder Trust?

Conceptually, all Charitable Remainder Trusts (CRT) are alike:  the property owner contributes his/her property to a trust and the trust pays the property owner and his/her spouse (and/or another), an income for the rest of their lives or for a specified term of years.  Specific differences in CRTs and how they are combined with other creative tools can mean dramatic differences for the property owner.

A well designed CRT can provide greater income for both the property owner and his/her heirs over a market sale. Even a lump sum of cash for special needs. Individual results can vary depending on the degree of planning and skill exercised by the trust plan architect in meeting the needs of the property owner.

Whether your property is paid for or not, a skilled specialist can design a CRT to provide you with considerably more income than you would realize from a sale. Here's how.

What if you could "sell" your real estate and instead of paying much of your hard earned profit in taxes, you could put that money in a secure investment that would pay you, your spouse (and/or another), a high yield income for the rest of your lives. Here the choice is easy, pay the tax and get nothing in return or let it provide you with an income for the rest of your life.

You will also receive a charitable income tax deduction that can put actual cash in your pocket by allowing you to reduce your adjusted gross income by up to 30%. This means the cash you would have given away is now yours to keep or spend as you see fit. In addition, you will be appreciated by your favorite charity or nonprofit organization because after you are gone, when you no longer have any use for the money, they will use any funds remaining in the trust to help some needy, well deserving people in a manner you so directed in the trust documents.

For example you might want to establish a scholarship for deserving students or otherwise support the mission of your favorite charity.  If you had sold your real estate and paid the tax all you would have gotten was money, less money at that and when it was gone, nothing. On the other hand, by using a CRT you net more money while you can still use it and when you don't need it any more, you and your name will live on forever continuing to do good for generations to come.

A well designed CRT can also provide funds for your heirs, far more than they would have received if they inherited your property, even though, they would have received a stepped up basis and paid no capital gains tax. A skillfully designed CRT can also provide you with a lump sum of cash to buy a new home, a motor home or anything else, all in addition to a secure income.

How can all this be true? It's simple! When there is more cash to work with, the options, combinations and possibilities increase dramatically. The fact is, many more property owners would be using a CRT if not for a lack of understanding on their part or the lack of skilled specialists willing or able to design a plan to meet their specific needs.

Before you sell get the facts. Any reputable charity or nonprofit that offers CRTs, will provide you with a written proposal at no cost. Shop organizations for the best proposal, then take the proposal to your CPA, tax attorney, or financial advisor and let them help you decide if a CRT is good for you. The choice will be clear. It's either to good to pass up or it's not.