What’s On Our Minds:

A charitable remainder trust (CRT) is a powerful estate planning tool that can provide a variety of benefits. These accounts enable investors to move funds out of their taxable estate, they provide a steam of income, and they enable wealthy individuals to fulfill their philanthropic goals.

Contributing a portion of your estate to charity may be something that you and your family strongly believe in, whether or not you receive any benefit from it. Although generosity is the driving force behind philanthropy, there are also many benefits that a donor can reap from making charitable contributions.

Considering that federal government charges a 40% estate tax (on individual estates larger than $11.2 million), it’s important for wealthy families to consider the many estate planning strategies available that can help reduce the tax bite upon a generational wealth transfer.  One strategy is the creation of a charitable remainder trust (CRT).

CRTs are an excellent option as they allow wealthy individuals to fulfill their philanthropic goals by moving assets out a taxable estate which can then grow, tax free, through investment.  Meanwhile, during the life of the trust, it is required that the CRT distributes between 5 and 50 percent annually to the beneficiary of the trust (either the grantor of the trust or their family).  These payments will last for a set number of years or the remainder of the grantor’s life, depending on how the trust document is written. The trust will end at the predetermined time and the remaining funds with go to the charity of your choice.

The tax advantages continue with the creation of a CRT.  Along with moving funds out of a taxable estate, upon the creation of the trust, the grantor can take an income tax deduction for the full value of the trust that can be spread over five years. Finally, the creation of a trust helps individuals avoid capital gains taxes. Assets with large unrealized gains can be moved into the trust, sold, and reinvested into a portfolio of income producing investments.

At Tufton, we provide comprehensive planning services to portfolios of all sizes and complexities and give you objective solutions. Armed with a plan, you can plan how your assets can help forge your family’s legacy.

Source: Fidelity

Last Week’s Highlights:

U.S. equity markets were in the green last week, adding to the previous week’s 2% rally.  At this point, the S&P 500 is essentially flat for the year. Earnings continued its strong start which helped to distract investors’ attention away from political headlines that have caused investor anxiety recently.

Looking Ahead:

Earnings season continues this week with one third of the S&P 500’s companies reporting their first quarter results. Important economic indicators will also be reported this week. Home sales data will be reported on Monday, the new homes sales figure on Tuesday, and first quarter GDP will be reported on Friday.  We’ll see if calm heads prevail during this important week of data released.