Tuesday, September 3, 2013
If you have a highly appreciated asset you may want to consider using a charitable remainder unitrust (CRUT). The recent increase in federal tax rates encourages people to use a CRUT. The appreciated asset is first placed in the trust, which is a tax-exempt entity. The trust can sell the asset without owing any capital gains tax itself. The key benefit to this type of trust is avoiding gains tax especially because the long-term stock gains has climbed from 15% to 23.8%.
After selling the asset, the trust will pay out a fixed percentage of the principal or an annual annuity. The payments are long term and will continue over a period of years. The payments may even continue for one or more lives and any remainder goes to charity. The law requires that the charity receive at least 10% of the initial worth. Those who use CRUT's will also get a charitable tax deduction.
See Ashlea Ebeling, Charitable Shelter: How CRUTs Cut Capital Gains Tax, Forbes Aug. 14, 2013.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.