Wealth Replacement Trusts Working for You

When you decide to make a donation to a charitable organization, you serve to benefit not only the recipient but also yourself.

How Does a Charitable Remainder Trust Work?
A charitable remainder trust is irrevocable. Once you create such a trust, you have essentially relinquished your ownership of appreciated property to the charitable organization of your choice. That property is then sold to an interested purchasing entity in order to reinvest the proceeds to earn income. As a result of your decision, you are able to claim deductions on your income tax form immediately and avoid capital gains taxes. Upon your death, the charitable organization becomes the recipient of the property, which usually equals a larger value than the original amount due to the reinvestment process. (Please keep in mind that this type of trust does not benefit your heirs.)

Something to keep in mind
Please keep in mind that a charitable remainder trust does not benefit your heirs; however, by establishing a wealth replacement trust, you can effectively combat this drawback.

The creation of a wealth replacement trust is accomplished by purchasing life insurance at an amount of your choice to reconcile a portion or all of the property value that is donated to the charity. After the second spouse passes away, beneficiaries are eligible to receive the proceeds of the wealth replacement trust without being required to pay estate taxes.

Remember, the cost and fees associated with purchasing life insurance depend upon several demographical characteristics, so this option may serve as a deterrent to some individuals.

This information is presented to educate the reader and does not constitute professional tax and legal advice.

back to articles >>