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Chances are that you want to create generational wealth for your family in the years following your death. If you have high-value assets now, you might consider selling them to contribute the proceeds to an account for this purpose. However, you might be subject to high taxes on these sales that can eat into what the asset is truly worth.
What can you do to protect your assets and pass on as much value as possible to yourself or to the next generation?
A charitable remainder trust could be the solution that you have been searching for. All of your highly appreciated assets that are exposed to taxes can be designated into this type of trust. Learn more about CRTs here to help you decide if this financial move is the right choice for you.
A Charitable Remainder Trust is a tax-exempt, irrevocable trust funded by donated assets. Payments continue for a specific term of up to several years or the life of one or more beneficiaries. After that period, the remaining trust assets pass to qualified charities you’ve selected or your family’s Donor Advised Fund (DAF).
Any highly-appreciated asset with exposure to taxes and to which you have a clear title can be put into a Charitable Remainder Trust.
See the different outcomes of selling an asset outright versus establishing a Charitable Remainder Trust.
There are two drawbacks to Charitable Remainder Trusts.
Once assets have been transferred to the trust, you no longer have access to the entire principal. If your goal is to use the entire proceeds from the sale of your asset to buy a large ticket item like a yacht or horse farm, a Charitable Remainder Trust is probably not for you.
The trust must be created by an attorney competent in irrevocable trusts, the assets need to be invested so there is liquidity and no violations of various rules, and annual tax forms must be filed. The annual maintenance costs (CPA, attorney, investment advisor) are paid by the trust itself after the initial trust creation.
Download Your Charitable Remainder Trust Guide
The logistics of setting up your Charitable Remainder Trust require the coordination of three disciplines -tax, legal, and financial - and professionals experienced with charitable trusts.
Navigating the setup for your charitable remainder trust requires the assistance of an experienced partner. With our unique tri-disciplinary firm that seamlessly melds legal, tax, and financial expertise, Magellan Planning Group is a good choice to help you establish your Charitable Remainder Trust. As fiduciaries, we always operate in your best interest.
Give us a call to learn more about how we can help you set up your Charitable Remainder Trust today!
A donor-advised fund (DAF) is a third-party entity set up to manage the charitable donations of individuals, families, and/or organizations.
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
This material was developed and prepared by a third party for use by your Registered Representative.
The opinions expressed and the material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The content is developed from sources believed to be providing accurate information and is not intended to be all inclusive.
Neither Cetera Advisor Networks LLC or its representatives able to offer direct investments into commodities or futures.