Tax Benefits
You immediately obtain the benefit of a charitable income tax deduction. This is equal to the present value of the remainder interest ultimately payable to MSU based on Internal Revenue Service tables of life expectancy factors. The older the beneficiary, the greater the charitable deduction.
You can fund your charitable remainder trust with cash, securities or other property. Most donors choose to fund their CRT with highly appreciated, low-income-generating assets since you can transfer them to the trust without incurring the capital gains tax. The trust could sell the assets without incurring any tax and then reinvest the proceeds in order to secure a higher current income yield.
Example: Nancy, aged 75, owns several stocks with a market value of $100,000, but they pay dividends of only $2,000 a year, or 2 percent of market value. She decides to transfer these securities to a charitable remainder annuity trust that will pay her $7,000 a year, increasing her gross income by $5,000.
If Nancy sold her stocks instead, she would pay an enormous tax on her capital gain. Their cost basis is $30,000, compared to the current market value of $100,000, resulting in a gain of $70,000. At a federal capital gains tax rate of 15 percent, the tax would be $10,500. This would leave her with only $89,500 to reinvest, so she would have to find stocks that pay a dividend of more than 8 percent to receive the same $7,000 her trust can pay her.
A charitable remainder trust allows you to keep the benefits of the donated assets for life, knowing you'll help to shape our future later. Look at these personal benefits you can enjoy:
- Increase your income when you give to a trust designed to pay out more than you now earn on the assets you will contribute.
- Receive a money-saving federal income tax charitable deduction.
- Pay no capital gains tax when you transfer unmortgaged appreciated assets to the trust.
- Free yourself from investment worries by securing professional management of the assets you give.
- Gain the enduring satisfaction of having made a major commitment to MSU.
If you are interested in learning more about a plan that could fit both your immediate needs and our long-range goals, please contact Jan Smith at
973-655-3439 or via email at smithja@mail.montclair.edu.
