Charitable Trusts Popular Strategy to Avoid Capital Gains Tax
According to a recent Financial Planning article, charitable trusts are gaining popularity among Americans in the top tax bracket that now owe 20 percent on long-term gains and a 3.8 percent Medicare surtax on net investment income.
One of the most popular instruments is known as a charitable remainder annuity trust (CRUT), which pays a fixed percentage (5 percent minimum) of the assets - typically highly appreciated assets like stock -- in the trust to beneficiaries. If the assets earn more than five percent annually, the trust can pay out increasingly more over time.
The creators of the CRUT receive an upfront tax deduction for the present value of the future donation, which must be at least 10 percent of the donated assets value. While creators can get a life-long cash flow from this irrevocable trust, the donated assets placed in the trust cannot be sold or passed on to heirs and revert to the charity after the death of the creators.
The Flanigan Law Group provides Southern California residents with personal attention for estate planning, administration and litigation legal services. When disputes between families, arise, they are very successful in resolving legal estate issues quickly and efficiently while preserving financial and emotional resources. Contact the Flanigan Law Group at 949-450-0041.