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    Selling “Highly Appreciated” Assets While Minimizing Taxation

    By Donald B. Kobrin

    For the past decade, I used estate planning tools to help my clients liquidate highly appreciated real estate and stocks while minimizing federal or state taxes on the gains.

    The vehicle we may use, through our affiliate legal firm, is a “Charitable Remainder Trust (CRT) and is sanctioned by the IRS as a means of donating assets to a charity, BUT AT A MUCH LATER DATE, which can extend beyond mom’s and dad’s lives and 20 years into their children’s lives.

    In its simplicity, the assets are retitled into the name of the CRT and then sold. Once sold, mom and dad, as trustees of the CRT, get to choose what investments they wish to allocate the liquid funds into. At the conclusion of every tax year there is a known value of their CRT accounts. This value determines the amount of money the primary income beneficiaries (which is generally mom and dad) must take out of the CRT in the coming year.

    The minimum withdrawal amount from a CRT is 5 percent of the tax year end value each year and can be withdrawn on any schedule, providing the entire 5 percent is taken in that calendar year. This percent, however, can vary from case to case and is determined by an internal IRS calculation based on the youngest age of the trustors and the “projected” length of time of the CRT. Information gathered at a CRT inquiry will determine this percent. This withdrawal, by the way, is taken by the primary income beneficiaries as ordinary income.

    When the last of the primary beneficiaries passes on, the next beneficiaries, called secondary income beneficiaries, continue their withdrawals for a maximum of 20 years or to the death of the last beneficiary. Only then does the entire value of the CRT account pass on to the charity (or charities) that were named many years ago.

    Also, because this is indeed a charitable donation, but at a future date, there are tax credits available to offset your adjusted gross income. The amount and nature of these credits are complicated and can be explained at a meeting with me at my office.

    If you think you might be a candidate for this tool, set up a meeting and I will be glad to fill you in on more specific details, and to see if a CRT is right for you!

    By contacting us you may be offered insurance and/or investment products for sale.

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