What's Next?
Austin Carroll is a financial advisor at Cornerstone based in Reno, NV. Austin has passed his Series 65 Securities Registration Examination. He helps clients create customized financial plans based on their unique financial goals by addressing topics such as income, investments, and taxes.
WHAT’S NEXT?
A CHARITABLE REMAINDER TRUST
You’re retired and have a plan in place for income, tax savings, long term care, etc., but now you are concerned about your legacy. You ask yourself the question, now what? Well, today I wanted to discuss with you and shed some light on an often-overlooked area in financial planning - the Charitable Remainder Trust (CRT). Below, we will look at some of the tax benefits and dive into what might make it an attractive option for your unique circumstance.
A Charitable Remainder Trust, by definition, is an irrevocable trust that could generate a potential income stream for you, as the donor, or other beneficiaries, with the remainder of the donated assets going to your favorite charity or charities. This financial arrangement offers a few advantages that I will highlight below.
#1 INCOME TAX BENEFITS
One of - if not the most - compelling reason for establishing a CRT is its potential for significant income tax deductions. In brief, when you make a charitable contribution to the CRT, the IRS allows you to deduct this amount from your taxable income, consequently lowering your income tax liability.
#2 REDUCTION OF ESTATE TAXES
Estate taxes can erode at a considerable portion of an inheritance. However, since a CRT is a tax-exempt entity, the full amount transferred into the trust is removed from your taxable estate, potentially saving a substantial estate tax bite. This feature is particularly beneficial for those individuals who are subject to state and federal estate taxes.
#3 CAPITAL GAINS TAX MITIGATION
The last thing I want to touch on is that CRTs can also help in mitigating capital gains taxes. When appreciated assets such as real estate or stocks, which have risen in value, are sold, the profit is subject to capital gains tax. Transferring such assets to a CRT and then selling it circumvents this tax as CRTs are tax-exempt entities.
In review, A Charitable Remainder Trust presents itself as a tool for your estate plan by blending philanthropic intentions with potential tax benefits. Whether it is income tax reduction, safeguarding your inheritance from estate taxes, or avoiding capital gains tax, a CRT is certainly an instrument deserving careful consideration.
WHERE TO GO FROM HERE
Remember, if you believe that this is something that might be of benefit to you, give your advisor a call or bring it up in your next review to see if a Charitable Remainder Trust fits into your unique financial picture. The potential tax-saving benefits underscore the significance of giving thoughtful attention to this potentially valuable component of your financial strategy. If you would like to discuss your options, please don’t hesitate to reach out to our team at Cornerstone to schedule a meeting. Call us today at (775)-853-9033 if you’d like to see how Cornerstone could help you.
This information should also not be considered tax or legal advice. Individuals should consult with a professional specializing in the fields of tax, legal, and accounting regarding the applicability of this information for their situation.