After years of managing a successful business or professional career, you and your spouse may find yourselves in a position to help others more than at any other time in your lives. Your two most important priorities are (a) to provide for your children and (b) to make a difference in the lives of others by making a significant charitable gift. As is true for many your most valuable assets besides your residence are appreciated marketable securities, or rental properties.
In this case there is a solution that might very well satisfy both your priorities. It is a charitable remainder trust (CRT) which can be funded with appreciated assets you have owned for years. A gift of stock or real estate is not treated as a sale so you do not have to realize any capital gains when you transfer it to a trust. Since the purpose of the trust is for charitable purposes, the capital gains realized when the assets are sold by the trustee are not subject to tax. And, the trust will pay you both for your lifetimes a certain percentage of the fair market value of the trust assets as revalued each year. The lowest percentage under the law is 5%. You will receive an immediate charitable deduction for the present value of the charitable remainder interest. When the surviving spouse dies, the remainder goes to the charitable organization(s) of your choosing.
But what about the kids? Although there may be other alternatives for replacing the inheritance your children would have received had you not been so charitably inclined, life insurance is oftentimes an excellent alternative. Using a life insurance policy in the amount of the after-tax value of the donated asset(s) had it been sold, and naming your children as the beneficiaries, you replace their inheritance.
