With the holidays fast approaching, now is the time to consider year-end planning and charitable giving as a way to lower income taxes. This is also a great time to develop a strategy to reduce estate taxes.

One strategy is to establish a Charitable Remainder Trust (CRT) which creates the ability to defer, or even eliminate, the recognition of capital gains on the sale of a highly appreciated asset, thereby eliminating taxation of the future sales proceeds. For example, an individual taxpayer who owns a multi-unit rental property and no longer wants the responsibility of being a landlord, but still needs the income from the property to maintain a desired lifestyle can contribute the property to a CRT. The taxpayer will receive an immediate charitable contribution deduction for a portion of the property contributed and receive an annuity, either for a term of years or the remainder of the taxpayer’s life, which can replace or even exceed the income received from the rental property.

Additionally, the CRT can liquidate the rental property and reinvest the proceeds in a balanced portfolio to generate income, all with no immediate income tax consequences. At the end of the CRT term, the remaining balance in the trust will go to the charity, or charities, of the taxpayer’s choosing, thereby providing for the charity and reducing the taxpayer’s estate.

If you would like to discuss this or any other charitable giving opportunity that can reduce your income and estate taxes, as well as accomplish your charitable giving goals, please contact Kevin Wiest at [email protected] or 844.4WINDES (844.494.6337).