Converting Assets to Income with Good Tax Results
Clients can convert from investments taxed as ordinary income to payments that are tax free or taxed at lower rates (qualified dividends or long-term capital gains, for example) through charitable gift annuities and charitable remainder trusts. Gift annuity payments currently can be as much as 75 to 85 percent tax-free return of principal during a recipient’s life expectancy. Charitable remainder trusts offer the opportunity for payments to be taxed as long-term gain or qualified dividends, under the four-tier system of CRT taxation. Tax-free payments are possible, as well, from tax-free interest or distribution of corpus (which come after ordinary income and capital gain payments).
Both of the foregoing gift arrangements also offer the opportunity to liquidate highly appreciated assets with reduction or avoidance of capital gains taxes. Real estate investors, or owners of collectibles, may decide to transfer assets laden with capital gains to charitable remainder unitrusts – not so much for the charitable deductions available as for the ability to sell the assets within a tax-exempt trust that will provide a lifetime stream of income to beneficiaries.
Copyright © by R&R Newkirk. All rights reserved.
Both of the foregoing gift arrangements also offer the opportunity to liquidate highly appreciated assets with reduction or avoidance of capital gains taxes. Real estate investors, or owners of collectibles, may decide to transfer assets laden with capital gains to charitable remainder unitrusts – not so much for the charitable deductions available as for the ability to sell the assets within a tax-exempt trust that will provide a lifetime stream of income to beneficiaries.
Copyright © by R&R Newkirk. All rights reserved.
