Capital Gains Tax - Charitable Remainder Trust!

[Ali Samana]

As investors, I am sure most of us try to minimize our tax liability and increase our profits. I do a few quick rehab flips and thus pay a big chunk of it to taxes. I wen to a seminar (I go to many and have never bought anything from them) from James Smith series and they had a harvard attorney there talking about a way to pay 0 capital gains taxes. He talked about forming a Charitable Remainder Trust (CRT) and buying properties through that. I received a negative response from my attorney about it on Monday and was told anything left in a CRT upon the death of two people (person and spouse) has to go to a charity, hence the name.

Does anyone know of any amendments to a CRT that would chage that fact? any workarounds that are legal? Has anyone used anything from James Smith series? Are they worth their salt?

Thanks in advance for any help on this.

[Richard Warren]

What exactly are you trying to accomplish?

CRTs are used as an estate planning technique to minimize or avoid capital gain taxes.

The short version:
Appreciated property is placed into the trust. It is sold tax-free because charities don’t pay tax. The proceeds are reinvested in income producing investments with the income being paid to the grantor (person who created the trust). That income is taxable unless tax-free bonds are used.

The proceeds are distributed to the selected charity at the grantor’s death.

The grantor receives an income tax deduction for the gift to charity. That tax deduction is based on the life expectancy of the grantor (IRS has tables for this).

Life insurance is frequently used to replace the assets being donated to charity. Life insurance is held in an irrevocable life insurance trust in order to avoid estate taxes on the death benefit.

This is a common, yet sophisticated, estate planning technique.

What exactly are you hoping to achieve?

:cool: