Hypothetical: An individual has an asset worth $100x, and the tax basis is $1x. The individual is looking forward to retirement and needs to convert that capital asset into a reliable stream of income. However, selling the investment would incur substantial taxes on the capital gain, leaving much less to invest in income-producing assets (bonds, stocks with high dividends, perhaps special assets). The individual is also in a high tax bracket and could benefit from some charitable deductions. Finally, this individual has provided by will a major gift to charity.
An alternative for this person to explore is the charitable remainder trust, which may be either an annuity trust or a unitrust. The individual will receive income from the assets for life and will enjoy substantial tax benefits.
Profile
- Individual with a concentrated, highly appreciated holding, such as stock options.
- Would like to convert that asset into an income stream, but is concerned about taxes.
- Plans to leave a major legacy to a university.
How we can help
- A charitable remainder trust helps to resolve these issues.
- No immediate income tax on asset diversification.
- Investments will be the responsibility of the trustee
- Trust pays either an annuity for life or a fixed percentage of the trust value each year
Your transition question to make the referral
“Have you heard about the benefits of a charitable remainder trust? May I introduce you to someone in our trust department who can tell you more?”
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