Charitable Remainder Trust

Christians who are financially blessed often have appreciated real estate, stocks, mutual funds and other assets. These forms of assets have created great wealth, on paper, for many individuals. However, many people are not tangibly benefiting from their appreciated investments since they may be receiving relatively little income from their holdings. Often times, people are interested in selling their appreciated low yield investments yet they decide against it because of the income tax they would have to pay. Charitable Trusts can provide a solution to this problem while simultaneously generating charitable gifts for Christian nonprofits.

Stewardship-minded Christian investors may have additional use for a Charitable Trust if they learn that their money is invested in companies which profit from or support abortion, pornography and other immoral activities. New investment research techniques have made it possible for Christians to find out whether their money is invested in unclean businesses, including companies which profit from or support abortion. However, an investor may feel trapped in their appreciated investments because they are worried about the capital gains tax they face if they sell the investment.

The Charitable Remainder Trust (“CRT”) can be just the solution for Christians who want to sell unclean investments yet are worried about the tax bill. With a CRT, a person can sell the appreciated stock or mutual fund and not have to pay tax on any paper gain. The full proceeds of the sale can then be reinvested to yield payments that typically exceed the income the person was receiving from the prior unclean investment.

The CRT is becoming increasingly popular with Christian investors who are concerned against protecting their gains in this volatile stock market. Against this unsettled backdrop of a roller-coaster stock market, many investors are becoming interested in financial strategies that can insulate them from the volatility in the stock market. A CRT can be an excellent strategy to potentially help Christians protect their investment gains and generate cash flow during their lifetimes.

In addition, a CRT has the advantage of giving you a current year tax deduction, based upon the fair market value of the securities, which may really help a person with their income taxes. To top it off, this type of Trust can enable a person to make a gift to Christian charities using moneys that would otherwise be lost to taxes. With all of these benefits, its no wonder that many Christians feel that the CRT is one of the better ways to advance their personal financial goals while also supporting Christian charities.

Because of the CRT’s importance as an effective planning strategy, Christians should become familiar with situations where a CRT can work. CRT’s work well for a person who: 1) is 55 or older, 2) has an appreciated asset like a rental property, stock or other investment which they would like to sell, 3) is interested in increasing their lifetime income, 4) is looking to reduce their income tax and estate tax, and 5) is interested in making a planned gift to a Christian nonprofit using funds that may otherwise be lost to taxes.

Excerpts from Finish Faithful: How to Create a Lasting Christian Legacy for your Family by Mark Henry, JD