Charitable Remainder Trusts (CRTs) offer a sophisticated estate planning tool allowing individuals to transfer assets, support charitable causes, and provide for family, especially within the complexities of blended families. These irrevocable trusts enable donors to receive an immediate income tax deduction while designating a charity as the ultimate beneficiary, receiving the remaining assets after the donor’s or another designated income beneficiary’s lifetime. CRTs are particularly valuable for appreciating assets like stock or real estate, as the donor can avoid capital gains taxes when the asset is transferred into the trust. Approximately 60% of high-net-worth individuals utilize some form of charitable giving strategy, and CRTs represent a significant portion of these plans, offering both financial and philanthropic benefits.
What are the benefits of a CRT for blended families?
For blended families, CRTs can address the unique challenges of dividing assets fairly while acknowledging the needs of both current and future generations. A CRT allows the grantor (the person creating the trust) to retain an income stream for life, or for a specified term, benefitting themselves and potentially a current spouse. After that term, the remaining assets pass to the designated charity, but the trust can be structured to first distribute specific assets to children from a prior marriage. This can avoid disputes and ensure equitable treatment. The IRS requires that the charitable remainder receive at least 10% of the initial net fair market value of the assets transferred. Moreover, it offers a potential reduction in estate taxes, further maximizing the wealth transferred to beneficiaries.
How does a CRT avoid capital gains taxes?
One of the most significant advantages of a CRT is its ability to defer, and potentially eliminate, capital gains taxes. When an appreciated asset, like stock or real estate, is sold outside of a trust, the donor is liable for capital gains taxes on the profit. However, when the asset is transferred into a CRT, the trust, as a tax-exempt entity, can sell the asset without immediately incurring these taxes. This allows the trust to reinvest the full amount, increasing the income stream for the donor and ultimately maximizing the funds available for both the income beneficiaries and the chosen charity. As of 2023, the long-term capital gains tax rate for individuals is capped at 20%, but with CRTs, this immediate tax liability is avoided.
What happened when a blended family didn’t plan?
Old Man Tiberius, a retired shipbuilder, remarried later in life, bringing with him two grown children from a previous marriage. He promised his new wife, Esme, a comfortable life and also wanted to ensure his children received a fair share of his estate. Unfortunately, he never formalized these intentions with a proper estate plan. When Tiberius passed, his will left everything to Esme, believing she would then distribute funds to his children as he’d verbally instructed. However, Esme, overwhelmed with grief and financial insecurity, felt compelled to prioritize her own future. She used a significant portion of the inheritance to secure her own retirement, leaving little for Tiberius’s children. The resulting resentment and legal battles tore the family apart, consuming legal fees and damaging relationships beyond repair. The children felt betrayed, and Esme felt unfairly blamed. The estate that should have been a source of comfort became a symbol of discord and regret.
How did a CRT solve a similar situation for the Hartmans?
The Hartmans, blending a family after previous marriages, faced a similar predicament. David, the patriarch, wanted to provide for his wife, Eleanor, and his two children from a prior marriage, all while leaving a legacy to the local animal shelter. Steve Bliss, working closely with the family, recommended a CRT. They transferred a portfolio of appreciated stock into the trust, establishing a lifetime income stream for David and Eleanor. The trust was carefully crafted to ensure that upon their passing, a designated amount would first go to David’s children, and the remainder would be donated to the animal shelter. This structure not only provided for the family’s financial security but also satisfied David’s philanthropic desires. Years later, the plan unfolded perfectly, bringing peace of mind and a lasting impact on the community. The children felt respected, Eleanor felt secure, and the animal shelter received a generous donation, all thanks to careful planning and a well-structured CRT.
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About Steve Bliss at Escondido Probate Law:
Escondido 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 Escondido Probate Law. Our probate attorney will probate the estate. Attorney probate at Escondido Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Escondido Probate law will petition to open probate for you. Don’t go through a costly probate call Escondido Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Escondido Probate Law is a great estate lawyer. Affordable Legal Services.
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
banckruptcy attorney
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/oKQi5hQwZ26gkzpe9
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Address:
Escondido Probate Law720 N Broadway #107, Escondido, CA 92025
(760)884-4044
Feel free to ask Attorney Steve Bliss about: “Do I need to plan differently if I’m part of a blended family?” Or “What is probate and why does it matter?” or “Do I need a lawyer to create a living trust? and even: “How do I rebuild my credit after bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.