Don’t
be surprised if your CPA or financial planner starts babbling acronyms: CRUT,
CRAT, NICRUT, NIMCRUT, Flip CRUT.
Hear
him out. The higher federal tax rates that kicked in this year have given all
these variants of the four-decade-old charitable remainder trust new appeal for
upper-income folks.
Charity doesn’t always mean a
one-way act of giving. Sometimes it is good to “give and receive.” Depending on your assets, you might want to
consider creating a charitable shelter trust.
These trust are known by some
rather silly acronyms, like CRUTs, CRATs, NICRUTs, NIMCRUTs, or Flip CRUTs.
Nevertheless, the power behind this alphabet soup of sorts can cut your capital
gains taxes or fund a retirement while benefiting your favorite charity at the
expense of the IRS.
The world of the CRUT and all
its brethren is familiar to some, but alien to many. If you are among those in
need of some background education on this timely subject, then a couple of
recent articles from Forbes are worth
reading.
The first is titled “Charitable Shelter: How CRUTs Cut Capital
Gains Tax.” As this article
notes, you can use a CRUT, or Charitable Remainder Unitrust, to cut your
capital gains taxes by using the trust to sell highly appreciated assets
without triggering any taxation, to provide you with an annual income stream,
and then to leave the remainder to charity.
With all increases in the capital gains tax considered, and other specific
taxes besides, a CRUT can mean preserving more than 20-30% of the value of the
asset of the top to benefit you and charity.
For some additional perspective
on the use of charitable trusts consider reading a companion article of real
stories from Forbes titled “Three Donors Tell Why They Set Up CRUTs.”
As you might imagine, choosing
the right charitable remainder trust depends a great deal on your assets, your
needs, and the likely timespan before the charitable part comes into play. As
with all estate planning, this is not a do-it-yourself project.
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Reference: Forbes
(August 14, 2013) “Charitable Shelter: How CRUTs Cut Capital
Gains Tax”
Forbes (August 14, 2013) “Three Donors Tell Why They Set Up CRUTs”