One of the primary objectives of estate planning for many individuals is to gain estate tax efficiency, and there are a number of legal instruments that can be utilized to provide this. The best way to proceed depends on the exact nature of your assets and what your overall intentions may be. Many people who are seeking estate tax efficiency also have an interest in giving something to charitable causes as a part of their legacy, and there are some vehicles of charitable giving that can efficiently accomplish both things at the same time.
One of these is the CRUT or charitable remainder unitrust. These vehicles provide the grantor or a beneficiary of his or her choice with an ongoing source of income via annual annuity payments that must equal no less than 5% and no more than 50% of the value of the trust. These annuity payments are made for the duration of the trust term or until the death of the grantor. Once the grantor dies or the trust term expires the charitable beneficiary receives the remainder that is left in the trust. This remainder must be at least 10% of the original trust value.
There are a few tax advantages that go along with the creation of a charitable remainder unitrust. You get a charitable deduction that is based on the valuation of the remainder interest. Plus, when you fund the trust you are removing those assets from your estate and in so doing you are reducing your estate tax exposure. If you were to place appreciated securities into the trust and then have them sold by the trust rather than selling them yourself you would not have to pay capital gains tax all at once on the total transaction. The tax would instead be paid over the course of the trust term.
Mr. Nirenstein is licensed to practice before the courts of the State of Connecticut and the United States District Court. He is a member of the Connecticut and Hartford County Bar Associations, and the Estate and Probate, Elder Law, Business Law and Real Estate Sections of the Connecticut Bar Association.
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