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Charitable Remainder Trusts

Maybe you are looking for a way to receive fixed income for life or a number of years, are concerned about the high cost of capital gains tax with the sale of an appreciated asset, or perhaps you recently sold property and are looking for a way to save on taxes and plan for retirement. A charitable remainder trust may offer the solutions you need and still benefit CSU!

How it works: You transfer your cash or appreciated assets to fund a charitable remainder trust. You receive an immediate charitable income tax deduction for the charitable portion of the trust. In the case of a trust funded with appreciated assets, the trust will then sell the assets tax-free, and you avoid capital gains on the sale of those appreciated assets.

The trust is invested to pay income to you or any other trust beneficiaries you select based on a life, lives, or a term of up to 20 years. CSU benefits from what remains in the trust after all the trust payments have been made. This plan is ideal for someone with cash or appreciated property worth at least $100,000 who desires income tax and possible capital savings. Whether you set up a Charitable Remainder Unitrust (CRUT) or a Charitable Remainder Annuity Trust (CRAT) is based on how they distribute income.

Charitable Remainder Unitrust (CRUT): A CRUT distributes a fixed percentage of the trust's assets each year, based on a revaluation of the assets. Since the CRUT pays you income that reflects the value of the trust's assets, the income has the potential to increase over time as the trust grows in value, so it is best to consult with your advisor on the various payout options. The trust can also receive additional contributions. The income from a CRUT is taxable, and the donor must pay taxes on it in four categories: ordinary income, capital gains, tax-exempt income, and return of principal.

Charitable Remainder Annuity Trust (CRAT): If you are tired of the fluctuating stock market and want to receive fixed payments, a charitable remainder annuity trust may provide you with the stability you desire. A CRAT distributes a fixed income amount each year based on the value of the property at the time the trust is funded. Additional contributions are not allowed. The income from a CRAT is usually taxed as ordinary income, but if the trust was funded with appreciated assets, some payments may be taxed at a lower capital gains rate.

If you have any questions about charitable remainder trusts, please contact us. We would be happy to assist you and answer any questions you might have.

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