Tax-Favored Lifetime Income
In conjunction with their Family Foundation account, many people take advantage of the CRT Advantage Trust tax-exempt income trust. The CRT Advantage is very popular with individuals who have appreciated real estate or appreciated stocks/mutual funds, or have low-income producing or non-income producing real estate or stocks/mutual funds.
Many people would like to increase their income from these assets but are reluctant to sell them because they don’t want to pay the capital gains tax. The CRT Advantage makes it possible for the appreciated property to be sold without incurring capital gains tax at the time of sale. This allows 100% of the sale price of the asset to be invested. Because you can invest a larger principal (no tax reduction), more annual income can be generated than by any other option.
The CRT Advantage trust then pays this annual income to the donors (single or joint and survivor) or persons they name as income beneficiaries for their lifetimes. At death of the last survivor, whatever is left in the trust will transfer to the donor’s family foundation. It’s almost like having your cake and eating it too.
In addition, when the CRT Advantage is funded, the taxpayer receives an immediate income tax deduction as well as an estate reduction which could reduce or eliminate any estate tax.
Heirs can also receive the replacement value of what goes into the CRT Advantage when they create a Wealth Enhancement Trust. This planning is optional, but when properly done, it eliminates any objections to the use of the CRT Advantage trust plan. In many cases, tax savings alone can pay to fully insure the value of the CRT. The insurance proceeds then go to heirs tax-free.