WEALTH ENHANCEMENT TRUST™

  
In the above example $1,000,000 in appreciated property is transferred to the CRT Advantage trust.  The trust is set up to pay 8% per year ($80,000 the first year) of the trust assets to the income beneficiary. 

In conjunction with the CRT Advantage, a Wealth Enhancement Trust™ is also established.  This trust is funded with a specially designed $1,000,000 life insurance policy.  The money to pay the premiums for this policy come mostly from tax savings, and if tax saving are not enough then a small amount of the premium payments can come from the newly created increased income stream generated by the CRT Advantage. 

At the death of the income beneficiary, $1,000,000 flows from the CRT Advantage trust into the donors family foundation account.  This creates a perpetual charitable family legacy.  In addition, another $1,000,000 is paid to heirs (and it is both income tax and estate tax free).

A Wealth Enhancement Trust is an integral part of the Family Foundation Planning process. 

When property is transferred to a charitable source such as a family foundation account or the CRT Advantage trust, that particular property is no longer owned by the donor(s). 

Since it is no longer owned by the donor(s), it is not subject to any estate tax, which is a good thing.  However, this does pose a potential problem for any heirs since they cannot receive property that has been used to create philanthropy.

The most tax efficient solution to this potential problem is to establish a Wealth Enhancement Trust.

This is an irrevocable trust that is funded with a life insurance policy usually up to an amount equal to the value of the property transferred  to your family foundation account or CRT Advantage trust.  Because the policy is owned by an irrevocable life insurance trust (ILIT) and not by you, all proceeds will be paid to your heirs without incurring any income tax or estate tax.

This results in your heirs receiving one hundred percent of the value of the property that was transferred to the charitable entity.  No one is disinherited from their inheritance.

Everybody wins when Family Foundation Planning is coupled with a Wealth Enhancement Trust.

●     You receive an income tax deduction

●    You reduce or eliminate any estate tax

●    You eliminate capital gains tax if using the CRT Advantage™  

●    Your heirs receive their full inheritance (and it is not subject to income tax or estate tax) 

      ●    Charities that you support will benefit from your philanthropy in perpetuity

Other names used for the Wealth Enhancement Trust are "Asset Replacement Trust" and "Wealth Replacement Trust". 

Any such Wealth Enhancement Trust planning is done outside and independent of The American Foundation.  This information is included because it helps make philanthropy more attractive.

Please Note: If you or your attorney or CPA have any questions regarding any of our charitable planning concepts, The American Foundation™ is always available to answer any questions or explain any concepts.