CRUT to avoid captial gains

Submitted by Douglas Bauerband on Fri, 2015-09-11 15:49

client has mutual funds with capital gains. We want to take 100k and open an CRUT.

If I transfer the mutual funds into a CRUT brokerage account and then sell the mutual funds;

a. will that avoid her paying any capital gains on the mutual funds?

b. Can I then move cash out of the brokerage account into other investments that are suitable for her age and income we need from the CRUT?

Thank you.
Douglas



Submitted by Bruce Steiner on Fri, 2015-09-11 20:57

  • A charitable remainder trust lets you diversify without a current capital gains tax.  However, the distributions from the trust are taxable to the extent of the current and accumulated income and capital gains.  The effect is to defer, not eliminate, the capital gains tax.
  • The value of the charity’s interest, as of the inception of the trust, has to be at least 10% of the initial value of the trust. 

 

  • $100,000 seems a bit small for a charitable remainder trust, but that’s the client’s decision.
  • Bruce Steiner, attorney, NYC, also admitted in NJ and FL

 

Submitted by Douglas Bauerband on Thu, 2015-09-17 23:46

the 100k can be cash or low cost basis mutual funds…which would be better?Thank you.re; did not want to take out several crat’s with charites so we created the crut to fund and she can list all 3 into one.

Submitted by Bruce Steiner on Fri, 2015-09-18 02:38

  • The purpose of a charitable remainder trust is to permit you to sell an appreciated asset and diversify without current capital gains tax.  You might do it with a low basis mutual fund (though if the mutual fund is already diversified you don’t have to sell it to diversify), but you wouldn’t do it with cash.

 

  • The charity need not be involved (and usually isn’t involved) in a charitable remainder trust other than to eventually get a check.  

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