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Ira Stretch Charitable Remainder Trust

A Charitable Remainder Trust (CRT) offers the perfect blend of giving and receiving. You receive regular income from your trust—either a fixed percentage or amount—during your lifetime or up to 20 years. Then, once the term ends, the remaining assets go to the charity of your choice, creating a lasting legacy.

CRTs are Used for Appreciated Assets and can Help You Save on:

Capital Gains Tax​ | Net Investment | Incom Tax​ | State Income Tax​ | Depreciation Recapture​ | Stretch an IRA​

About IRA Stretch CRTs

Advantages

Considerations

Advantages

1. Assets grow tax-free compounding in the Charitable Remainder Trust, similar to how assets grow in an IRA​

  • Grow asset tax-free compounding for a longer time horizon​


2. Force kids to Stretch payments​

  • For their lifetime, term of years (up to 20 years), or lifetime and term of years​
  • Current IRA Law states that (non-spousal) heirs can take the proceeds in year one or stretch distributions over ten years​
  • How much is too much to leave to an heir?


3. IRA assets are outside of the estate​

  • IRA do not qualify for the Estate Tax Exemption and do not get a step up in basis​
  • Avoids double taxation (Income in Respect to Decedent Tax (IRD) and Estate Tax)​
  • IRD rates are at the beneficiary’s Income Tax Rate​
  • Estate taxes are currently 40% on assets above the Estate Tax Exemption​


4. The IRA Stretch Charitable Remainder Trust provides asset protection​

  • Including protection from creditors and divorce ​


5. The Charitable Remainder Beneficiary can be your own family-advised Fund​

  • Forced philanthropy and essential values from the grave​
  • Keep the family legacy for generations​

​

Features

Considerations

Advantages

 

1. Can be based on life expectancy or term of years or both ​

  • Life expectancy works excellent if the donor plans to live long​
  • The term of years is maxed at 20 years​
  • Life expectancies and a term of years can be used if the calculation deems that 10% will benefit charity as a remainder beneficiary.​

 

2. The amount of lifetime income (at least 5%) must leave at least a 10% remainder to charity​


3. Income tax deduction depends on how much will go to charity (or DAF)​

  • Impacted by the length of the Trust, how much income the donor takes, and the rates when the trusTrustset up​

 

4. Works best in higher interest-rate environments and uses the AFR 7520 Rate​


5. A Net Income Makeup or FLIP provision can be used to defer income until a later time ​


6. If the CRT is created as a Unitrust, assets can be added to the Trust​


7. Has a 30% Adjusted Gross Income (AGI) Limitation​

  • The deduction can be used in the year of the gift and five years after ​

Considerations

Considerations

Considerations

 

1. A CRT are Irrevocable Trusts​


2. The initial language of the Trust will dictate the Trust for its life​

  • Language can be added to the Trust for some flexibility

 

3. There are legal costs to setting up a CRT​


4. It is essential to understand the Trust and to have it be part of an arching Estate Plan​


5. The CRT will have its own Tax Identification Number and be responsible for filing taxes each year​


6. There is a cost to filing taxes ​


7. A Trust Administrator can be hired to ensure the integrity of the Trust and file the tax returns​


8. The Trust can pay tax filing, administrative, and other fees​. ​

IRA Stretch CRT Graphics

 


Disclosure

 Mrs. House does not offer tax or legal advice; nothing in this presentation should be construed as such.  Donors should consult with their qualified financial, tax, and legal advisors before undertaking any tax planning or legal strategies discussed herein.​ 

Copyright © 2019 - All Rights Reserved.

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