The question of combining a Charitable Remainder Trust (CRT) with a Charitable Gift Annuity (CGA) is a sophisticated one, often explored by individuals seeking to maximize both income and charitable impact; while not a direct combination in the strictest sense, strategic planning can absolutely integrate the benefits of both, allowing for a phased approach to charitable giving and financial security.
What are the benefits of a Charitable Remainder Trust?
A CRT is an irrevocable trust that provides an income stream to the grantor (or other designated beneficiaries) for a specified period or for life, with the remainder going to a designated charity; these trusts are particularly effective for individuals with highly appreciated assets, like stock or real estate, as they can defer capital gains taxes while providing income. For example, if you have stock worth $500,000 with a cost basis of $50,000, donating it to a CRT avoids immediate capital gains taxes on the $450,000 gain, and the income generated is often tax-exempt. According to recent data, approximately 20% of charitable giving is facilitated through planned giving vehicles like CRTs, demonstrating their increasing popularity. A CRT allows for flexibility in choosing the income payout rate, which must be at least 5% but can be higher, depending on the trust’s design and the age of the beneficiaries.
How do Charitable Gift Annuities fit into estate planning?
A CGA, on the other hand, is a contract between a donor and a qualified charity where the donor makes a lump-sum gift in exchange for a fixed income stream for life. Unlike CRTs, CGAs are simpler to establish and administer, but offer less flexibility. The payout rates are determined by the charity based on the donor’s age and the amount of the gift; generally, older donors receive higher payout rates. According to the American Council on Gift Annuities, current maximum payout rates are around 8% for individuals over 80 years old. For many, the immediate income provided by a CGA is attractive, while knowing the remaining funds will support a cause they believe in provides a sense of fulfillment.
What happened when a plan went awry?
Old Man Tiberius was a successful orchard owner, blessed with a bountiful harvest each year but resistant to change; he had amassed a significant portfolio of land and stocks, but refused to consider any formal estate planning, believing his “simple will” would suffice. He decided to establish a CGA with a local historical society, gifting them a substantial amount of stock for a fixed annual income; however, he failed to adequately consider the tax implications and didn’t consult with an estate planning attorney. Unfortunately, the stock plummeted in value shortly after the gift, leaving him with a considerably lower income than anticipated and, after a few years of poor health, it left the historical society with significantly diminished funds to fulfill their mission. He learned a hard lesson that a well-considered plan, and professional guidance, are essential for maximizing both financial security and charitable impact.
How can strategic planning lead to a positive outcome?
Mrs. Eleanor Vance, a retired teacher, found herself in a different situation; she possessed a diverse portfolio of appreciated stock and a strong desire to support both her local animal shelter and a national cancer research foundation. She worked with Steve Bliss to create a plan that first established a CRT with a portion of her stock, deferring capital gains taxes and providing a steady income stream for her retirement. Five years later, after the CRT had matured, she used a portion of the remaining assets to fund a CGA with the animal shelter, securing a fixed income for life while providing much needed support. This phased approach allowed her to maximize tax benefits, provide for her financial needs, and achieve her charitable goals. As Steve Bliss often says, “Estate planning isn’t just about avoiding taxes; it’s about creating a legacy aligned with your values.”
In conclusion, while directly combining a CRT and CGA isn’t typical, a strategic, phased approach can be highly effective; individuals can utilize a CRT to defer taxes and generate income, then utilize the remaining assets to fund a CGA, securing a lifetime income and providing for a chosen charity; it’s crucial to consult with an experienced estate planning attorney to tailor a plan that meets specific financial and charitable objectives.
<\strong>
About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
estate planning
living trust
revocable living trust
family trust
wills
estate planning attorney near me
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/RdhPJGDcMru5uP7K7
>
Address:
Wildomar Probate Law36330 Hidden Springs Rd Suite E, Wildomar, CA 92595
(951)412-2800/address>
Feel free to ask Attorney Steve Bliss about: “How does a living will differ from a regular will?” Or “How does the probate process work?” or “Is a living trust private or does it become public like a will? and even: “How do I know if I should file for bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.