There are many charitable organizations that need your help, from Hurricane Katrina relief efforts to the American Red Cross to Jerry’s Kids and the Muscular Dystrophy Association to your local place of worship.In last month’s article, I wrote on 1031 exchange alternatives, private annuity trusts and charitable remainder trusts. A quick re-cap from the article:”Private Annuity Trust (PAT) would allow him to move the real property to a trust and in return he would receive an income stream based on the IRS Mortality Tables. His beneficiaries would receive dollars that were gifted into a separate part of the trust upon his death. Taxes would be deferred until the income stream began, which could be years away.A charitable remainder trust (ChRT) is where he would gift the proceeds of the sale to charity that the charities would receive after his death. During his life time, he would receive an income stream … and his beneficiaries would receive nothing except the benefit of knowing that the money went to a good cause.”For those of us with altruistic motives, a charitable remainder trust can and does serve the purpose.As an example, let’s say you have $500,000 in highly appreciated stock (real estate, or other investments) that you have had for a number of years. Your basis in the stock was $100,000, giving you $400,000 in capital gains. Taxes will be due on the capital gains amount, and for this example let’s use 15 percent. The total taxes due on the transaction is $60,000.By having a ChRT, you would gift the stock to the trust. The trust could turn around and sell the stock with no capital gains tax due. The trust could then purchase a well-diversified portfolio of securities. As part of the trust agreement, you could receive an on-going income stream for life and if married, for the life of your spouse.In the year that you made the gift, you would receive a charitable contribution deduction plus you would have saved the $60,000 in capital gains taxes mentioned above.The new wealth management plan has now saved you a substantial amount in taxes, diversified your portfolio, created a lifetime cash flow and created a legacy for charities or a family foundation in your name. Your heirs would know the money went to a good cause.If you do want your heirs to receive part of your estate, a good estate plan makes all the difference. If you do not have one, get one. If you haven’t looked at it since the kids were little, it is time to update it.As always, please seek the assistance of a knowledgeable estate planning attorney and certified public accountant before proceeding.Donnell Services, LLC719-886-3377Registered RepresentativeSecurities America, Inc.Member NASD, SIPCFor more information, visit www.alexdonnell1.sarep.comDonnell Services, LLC and Securities America, Inc. are independent companies.
