Posted by Mike on May 09, 2005 at 19:44:32:
Does anybody know any contacts for setting up a CRT for the Delaware area??
Thanks, Mike
Charitable Remainder Trusts - Posted by Sam
Posted by Sam on April 17, 2005 at 07:54:02:
Anyone have any strategies for doing rehab deals in a CRT in order to avoid paying taxes on the profits. I heard that I could do this and get current income from the trust tax free and when I and my heirs die that the money in the trust goes to a charity. Sounds like a neat idea. What are the mechanics of starting such a program. Any resources available that explain CRT in depth.
Re: Charitable Remainder Trusts - Posted by Sam
Posted by Sam on April 17, 2005 at 13:18:17:
Thanks for the advice. I heard this concept at a seminar promoted by Jay Mitton. The speaker made it sound like all you have to do is fill out a 1 page trust and voila instant tax savings. Do you know any attorneys who specialize in this?
Re: Charitable Remainder Trusts - Posted by Jimmy
Posted by Jimmy on April 17, 2005 at 11:36:16:
CRT’s are an income tax deferral tool often employed by estate planners are part of fairly sophisticated estate plans (“EP’s”). Technically, CRT’s are not really EP tools.
Here’s the basic idea. But caveat: there are several varieties of CRT’s, and the rules are complicated. Maybe 1 out of 20 tax lawyers understand these things.
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appreciated property is usually the asset contributed to the CRT. for reasons descussed below
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the CRT will require a series of payments back to the creator of the trust (himself, or a designee). the payment can be expressed as a fixed amount each year, or a variable amount based on the asset values that prevail the beginning of each year. the former is a CRAT–charitable remainder annuity trust. the latter is a CRUT-charitable remainder unitrust. there are strategic reasons for using one or the other. too complicated to get into it here.
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the term of the trust is another strategic choice. can be set up for one or more lifetimes, or for a fixed period of years.
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when the trust reaches it term, the remaining property (the “remainder”) is remitted over to a designated charity. thus the name.
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we can’t get very cute with the remainder anymore. its actuarial value, as of the date of creation of the trust must be AT LEAST 10% of the value of the property contributed. this means we can’t set up a 50 year CRAT paying 20% each year. there rules came into play around 1999 in response to some semi-abusive deals done by Bill Gates and others.
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the CRT is a tax-ememmpt vehicle. so that appreciated property can be sold after transfer to the trust, without triggering a capital gain tax. However…
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the distributions of property back to the trust creator (or his designee) do have tax consequences. the payments will be part interest income, part capital gain and part return of capital. That’s why we call a CRT a tax-DEFERRAL tool. it does not eliminate the capital gain tax, it defers it over a period of years.
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and let us not forget that the actuarial value of that remainder interest is allowed as charitable income tax deduction in the year the trust is created.
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there may be some UBTI issues to worry about here. that is the Unrelated Business Income Tax system which applied to charities and other exempt orgs which get involved in trades or businesses. it is not fair for exempt orgs to be able to operate businesses without taxes, and compete with taxable enterprises. and the UBTI is in place to create a roadblock. a very fair system.
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DON’T EVEN THINK ABOUT DOING A CRT FOR REAL ESTATE INVESTING UNTIL YOU TALK TO AN ATTORNEY WHO SPECIALIZES IN THIS AREA. THERE ARE MANY WAYS TO BLOW THIS DEAL. expect some hefty legal fees. the fees wold not just be for the creation of the trust. you woudl absolutely need to have perodic reviews for troubleshooting and maintenance.
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the people who often promote these deals are not the attorneys, but are LIFE INSURANCE AGENTS. they like sell life insurance to “replace” the assets given to charity. Never enter into one of these deals on the recommendation of an agent. Talk to an attorney (who is INDEPENDENT of the agent) for candid information .
Re: Charitable Remainder Trusts - Posted by Kiyah
Posted by Kiyah on May 09, 2005 at 13:10:31:
Sam, I attended Jay Mitton’s seminar and was under the same assumption. Were able to find someone to help you set up a CRT? I’ve called dozens of people and have no luck.
Re: Charitable Remainder Trusts - Posted by Jimmy
Posted by Jimmy on April 18, 2005 at 09:27:34:
I know many attorneys competent to do this work. Where do you live?
Re: Charitable Remainder Trusts - Posted by Mike
Posted by Mike on June 09, 2005 at 07:58:13:
I have benefitted from the posts on this topic, so I feel obligated to contribute…
If you want to set up a CRT, without being further limited, or having your CRT declared invalid by the IRS somtime in the future, you had better check out this site:
http://www.pgdc.com/braf/item/?itemID=281252
Good Luck to all and Thanks.
Re: Charitable Remainder Trusts - Posted by Sam
Posted by Sam on April 18, 2005 at 12:27:16:
I’m in Maryland
Re: Charitable Remainder Trusts - Posted by Jimmy
Posted by Jimmy on April 18, 2005 at 13:53:06:
would you prefer an attorney in Baltimore? DC Area? elsewhere?
lets take this off the bulletin board. reply privately. the email address you used last time was not real.