Setting up a Charitable Remainder Trust to avoid paying taxes

S

shadowtrader

I heard from a friend that I should set up a corporation and a Charitable Remainder Trust to avoid paying taxes on my capital gains. I believe the idea is that the beneficiaries could get the capital gains tax free, and the remainder would go to the charity upon death. Those with high returns would benefit, if this is the case.

I just wanted to know if anyone had any experiences or thoughts on the subject before I invest time and money researching. Thank you for your input in advance.
 
I would strongly advise a discussion with an expert.

Charitable Remainder Trusts come in a few varieties, each with different payout rules and remainder treatment.

In any case, this is not a simple instrument. It is highly unlikely that anyone on ET, myself included, can offer any information worth anything.
 
Yeah and you can charge the trust money to run it.....but what do I know?

Michael B.



Quote from shadowtrader:

I heard from a friend that I should set up a corporation and a Charitable Remainder Trust to avoid paying taxes on my capital gains. I believe the idea is that the beneficiaries could get the capital gains tax free, and the remainder would go to the charity upon death. Those with high returns would benefit, if this is the case.

I just wanted to know if anyone had any experiences or thoughts on the subject before I invest time and money researching. Thank you for your input in advance.
More...
 
Thanks for the replies. Student, I will definitely seek the advice of a good lawyer if I decide to set a crt up.

ES, I never even thought about making money that way. Thanks.
 
i think Charitable Remainder Trust requires giving away your assets. if you are a yonger person do you really want to lose control of your assets? if you are retirement age and can see the end of your life and can figure out what assets you may never need again it can make sense.
 
Both Vhehn and TheStudent have given you good advice. A CRT sounds deceptively simple and attractive, but it is expensive to set up and to operate. You have to hire an expert every year to determine the appropriate payout to the income beneficiary. You may have to hire a third person to perform the duties of the trustee/fiduciary. I would not recommend a CRT for someone except as a component to an overall estate plan, and even then only for a wealthy person. The CRT reduces your control over your assets, something that may not be to your advantage at this stage of your life. I echo the comments that this is NOT something you want to do without the advice of an expert, and even then, do not do it until and unless you understand exactly how it works and how it will impact you.
 
The reason cap gain taxes are avoided is because you are turning over the assets to a charity. You receive the appropriate tax deduction, and a certain % income for life from those assets, and when you die, your beneficiary also receives that income. The charity keeps the assets forever. This is not revocable.

There are other types of plans you can use to reduce/avoid taxes on your estate that may better suit you. Better to have a consultation with an estate planner.

If instead what you're really interested in is simply saving taxes on income and the CRT idea was overkill on the part of your friend, then you would look into setting up a business entity or trader status in order to write off expenses.
 
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