Through the creation of a charitable remainder trust,
the
Rissers turned burdensome obligations into lifetime income
and a substantial estate gift with tangible benefits today.
See their story: bandwidth - high
/ low. |
A charitable remainder trust can be used at different points in your life
to meet a variety of goals. This planning tool can be used to
- increase income from low-yielding assets;
- reduce or eliminate income, estate, and gift taxes;
- diversify investments with potential for tax-free growth of assets;
- create income for children, parents, and other loved ones;
- further the mission of the church with a gift that might not have been
possible otherwise.
How does a charitable remainder trust work?
You (the donor) transfer cash and/or other assets, such as securities,
real estate, and business interests, to a trust according to your state laws.
Payments from the trust can be made to you and/or others for life, for a
specified period of time up to twenty years, or a combination of lives and
periods of time. A payment schedule is determined when the trust is created
for annual, semiannual, or quarterly payouts. The trust can be created so the
amount of income is fixed or so the income will fluctuate with the performance
of the assets in the trust. In some cases, payments are tax free or taxed at
lower rates.
At the end of the trust period, assets remaining in the trust (the
charitable remainder) are transferred to the church. Because the trust has a
charitable purpose, gift, estate, and income tax deductions can be taken in
the year of the gift for the value of the trust’s gift portion. A trust
document should always be drafted or reviewed by your advisors, whether it is
relatively simple or complex.
Increase your earnings and enjoy tax benefits.
You can place assets in a charitable trust that have increased in value
but earn little income, then sell and reinvest them in higher-yielding assets.
Capital gains will not be subject to tax at the time of the sale, allowing all
the proceeds to grow and earn income. Any income beyond what is needed for
payments to trust beneficiaries can accumulate inside the trust tax free.
For example: Alice and Bill, ages 72 and 75, purchased real estate years
ago. The original purchase price was $40,000. The property value has since
grown to $200,000.
Compare the following:
| |
If sold by Alice and Bill |
If sold within a charitable unitrust |
|
Sale amount |
$200,000 |
$200,000 |
|
Capital gains tax** |
$42,000 |
$0 |
|
Amount reinvested |
$158,000 |
$200,000 |
|
Annual income at 8% |
$12,640 |
$16,000 |
|
Tax savings from charitable tax deduction |
$0 |
$17,422* |
|
*Amount varies
**Assumes 15% federal capital gains tax & 6% state tax |
Retirement Planning
A charitable remainder trust provides the opportunity to enhance your
retirement income, knowing the funds that remain when the trust ends will help
further the mission of the church.
Cover Educational Expenses
If you would like to provide funding for a child or grandchild’s
education, a charitable remainder trust established to provide income for a
number of years (up to twenty) can be used. Funds given to others for
educational purposes are not tax deductible and may be subject to gift tax.
However, a portion of the assets placed in a charitable remainder trust for
educational expenses is tax deductible because the trust is for charitable
purposes.
Care for Older Loved Ones
As you plan for your retirement, you may also wish to provide financial
assistance for your parents or other loved ones. Typically, people do this
from after-tax dollars, which can be subject to gift tax. You can set up a
charitable remainder trust that will pay a fixed or variable income to one or
more loved ones throughout their lives, resulting in an income tax deduction
for you.
Fixed or Variable Income
A charitable remainder annuity trust offers beneficiaries a fixed payout
amount, which is established when the trust is created. A charitable remainder
unitrust provides variable payments. It is used when you want the payments
each year to equal a percentage of value of the assets that year. A flip
unitrust can be used so the trust pays the lesser of the payout and the net
earnings for a period of time, or until a specific event, before paying the
full fixed percentage of the value of the trust assets. The flip unitrust is a
great tool for real estate or business interests. An Estate and Financial
Planning minister can help you accomplish these goals.
Gifts of funds can be directed for the benefit of the World Church and/or
subsidiary jurisdictions. To name the church as holder of the charitable
remainder interest in your trust, use the following designation: “Community
of Christ, a church with headquarters in Independence, Missouri.” For
assistance, contact Estate and Financial Planning Ministries at efpm@CofChrist.org
or 1-800-884-7526 (1-877-526-7526 in Canada).
