gookmd, re: "does anyone know anything about charitable remainder trusts? i heard you can trade without paying capital gains using this technique"
This is correct. You can set up an irrevocable CRT and assets can be traded tax free. These work best for highly appreciated assets. You set these up to pay you an annual percentage of the asset value (usually in the 5-10% range, depending on a lot of factors).
Understand that you are giving away the asset. Once it is in the CRT the principal cannot be taken out. If the tax laws change (presumably the reasone that you do this in the first place), then you can't revoke the trust. And once you die, the remainder goes to the named charity. Another benefit is that you get a chariftable deduction in the year it is donated. The amount of the deduction is based on actuarial tables based on your age.
To trade common stocks, one needs to put them into a vehicle like a variable annuity. There are costs associated with managing the asset this way. There are also annual costs associated with managing the trust.
I've looked into these in the past and they seem awfully complex. But depending on your situation, your age, and your inclination towards charitable giving, they may be fine for you.
One thing you can do to pass the principal on to your heirs is to take out a life insurance policy on the principal amount using the tax savings from the current tax deduction and part of the income from the trust.
Given the recent reduction in capital gains tax, these are less attractive than they used to be.
If you do this, make sure that you use a good lawyer that has done a lot of these. Once you've given the asset away, you can't get it back. If the trust is setup incorrectly, then you lose. |
