You have worked your whole life to earn your retirement. You have saved money and invested well, funding a relaxing retirement free of obligation. All that remains is making sure your children and heirs have the financial stability they need to succeed.
If you are looking for options for securing assets and reducing estate taxes, you may consider a charitable remainder trust (CRT). CRTs help secure assets, tax-free, in a trust with a charity you want to support. CRTs offer more than just securing your charitable legacy, however.
How to benefit from a CRT
Grantors can set up CRTs with almost any local charitable organization, school or library. Many people set up a CRT to benefit their local community and secure a legacy therein. A CRT could help provide grants, scholarships or fund outreach programs to help the less fortunate. Additionally, CRTs can provide a steady source of income throughout your retirement.
You can benefit from a CRT in several ways:
- Tax deduction: Donors receive an income, estate or gift tax deduction based on the donated asset’s value. The larger the donation, the higher the tax benefit.
- Another source of income: If you enjoy income from the asset you intend to donate, you will keep that income stream with a CRT. The asset will appreciate tax-free in the trust and continue to fund your retirement.
- Tax-free growth: The trust can sell appreciated assets without incurring federal income tax on the gains. The IRS will tax the beneficiaries’ resulting income, but that’s it. Additionally, proceeds from the sale might allow the charity to reinvest in a high yield opportunity.
- Establish one’s legacy: When you pass, the asset transfers entirely to the charity, furthering your legacy of giving with a charitable impact beyond death.
- No capital gains taxes: Estate taxes can wreak havoc on an estate and compromise inheritances. Many people sell off assets to reduce these taxes but may incur 15-20% in capital gains taxes after the sale. A CRT avoids all these taxes, ensures your hard work continues after death and lowers the value of the rest of your estate.
A lawyer can help set up a CRT
If you know which charity you want to benefit from your CRT, you can contact a local lawyer familiar with Texas estate planning and estate taxes. An attorney can answer your questions, contact the charity and draft all the necessary paperwork.