Dusting off the Old Charitable Remainder Trust

Dusting Off the Old Charitable Remainder Trust

At Rodriguez, Horii, Choi & Cafferata LLP we have been drafting more charitable remainder trusts in the last year than had been the case for the past decade or so. Three things are driving client interest in a charitable remainder trust.

First, as the economy continues to recover, clients have seen their assets appreciate significantly in value. Second, tax increases at the federal level and in the state of California have significantly increased the taxes that would be due on the sale of an appreciated asset. Third, many donors have been reaching an age where they are looking to convert appreciated assets such as real estate or closely held stock into income for retirement.

A charitable remainder trust allows the donor to sell an appreciated asset without paying tax on the gain from the sale and receive a stream of income for life. The balance of the assets remaining at the client’s death pass to charitable organizations.

I started talking about renewed interest in charitable remainder trusts in 2013 in a presentation called “Dusting Off the Old Charitable Remainder Trust.” In my materials for that presentation, I discuss the basic rules for a charitable remainder trust and its benefits for a donor selling an appreciated asset. More recently, I have been talking about assets that are challenging to put into a charitable remainder trust. These assets are encumbered property and S-corporation stock. I also discuss increasing flexibility with respect to the payment from the charitable remainder trust. These topics are covered in “Advanced Charitable Remainder Trusts Design.”


Posted in Charitable Trusts, Tax Laws.