Using a Charitable Remainder Trust with a Private Foundation
The Charitable Remainder Trust (CRT) is also a very popular
vehicle that is used to help a donor avoid capital gains on
the sale of a highly appreciated asset. It will also generate
a current value charitable deduction and unlike the private
foundation, it will generate income for as long as the donors
full life. The proceeds from the CRT are then left to charity.
That is where the private foundation comes in. It can be named
as the remainder beneficiary of the assets inside the CRT.
A Private Foundation can also work well in a situation where
a donor of a Charitable Remainder Trust has established their
own non profit 501(c) charitable organization or has a desire
to set one up in the future. In many cases the donor is or
will be active on the board of that charity as well. In this
situation the Private Foundation can provide a little more
flexibility and options to accomplish more specific goals
with the charity it is designed to support.
Let's look at an example:
George and Martha Washington own a strip mall that they originally
built 20 years ago in the suburbs of a major city. Their cost
to build at the time was $3.5 million. They have since depreciated
their cost basis down to $1.5 million. The city has now grown
dramatically, and the suburbs now look more like a part of
the city. The Washington's are older and looking to do some
estate planning and diversify what is now the bulk of their
estate as the strip mall is now valued at $20 million.
The Washington's are also very active with a small local
non profit in town that helps homeless women with children.
It is a shelter that feeds and houses the families and works
with the women to get back on their feet by helping them find
employment and eventually their own housing. The shelter has
had a hard time recently finding the space to house these
families.
The Washington's decide to sell their strip mall using a
combination of a Charitable Remainder Trust and an outright
sale by splitting the interest in the property.
For their income needs they put $10 million into the CRT
and sell the property, with the other $10 million retained
as their own. The CRT tax deduction is used to help offset
some of the taxes on the retained property portion of the
sale.
After the sale they donate $1 million to the local shelter
from the portion of the sale proceeds from the retained portion
of the property. They will use the monies to purchase two
adjacent properties to the shelter and use the homes on those
properties to greatly expand the shelters ability to house
more families.
The Washington's also established a 2 million Private Foundation,
again with proceeds from the retained portion of the sale.
They will use the foundation to donate monies each year to
support the on going management expenses of the shelter. They
also named their Private Foundation as the recipient of the
remainder interest of their Charitable Remainder Trust. The
Washington's have also stipulated that their children and
grandchildren take over the Private Foundation when they pass
away and use the monies to continue to support the local shelter.
More Information on a Charitable Remainder Trust
For more detailed information on a Charitable
Remainder Trust visit one of our other Charitable Planning
web sites at:
www.CharitableRemainderTrust.com
You can also click here to
request a FREE copy of our Private Foundation Planning Guide.
It also has additional information on how to use a Private
Foundation in conjunction with a CRT.
Tactical Wealth Advisors, LLP
Investment advisory services are provided through Tactical
Wealth Advisors, LLP a Registered Investment Advisor. The
information contained on this site is for educational purposes
only, it is not intended to be professional tax or legal advise;
consult a tax advisor about your specific situation.
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