Retirement Planning Store, Inc.
  • Home
  • LTC
  • Insurance Review Service
  • Privacy Policy
  • Contact Us
  • Blog CMS
  • Annuity
Like us here

Passing On The Assets In A Lifetime CRT

2/9/2023

0 Comments

 
With a Wealth Replacement Trust, you can defer capital gain taxes, guarantee an income stream, and ensure that your money eventually goes to your family.

❗ Key Takeaway: In our experience, one of the main concerns our clients have with Charitable Remainder Trusts—and especially the lifetime version—is that their family might lose the money if something happens to them during the trust's term. This shouldn't be much of a concern, because we offer a common tool—the Wealth Replacement Trust—that can ensure that assets are available to your family if the worst happens.
The ChallengeMost of our users are interested first in the bottom line: How much money can they earn by moving their assets into a tax-protected account? The answer, for most people, is to use a Lifetime Charitable Remainder Trust. But the word "lifetime" is a hang-up for many because they're worried about what might happen if they pass away before they've had a chance to withdraw most of the value from their trust. (Importantly, with a Lifetime CRT, if you are the sole income beneficiary and you die, the money immediately goes to charity. That's the situation we're trying to protect against here—and it's not a concern if you decide to sign up for a Term CRT.)
From a wealth planning perspective, this shouldn't be a concern even with Lifetime trusts; we offer a common tool that helps our customers arrange their affairs so they can ensure that there will be money to pass on to their heirs—spouse, children, or others—and that they'll be able to take advantage of the magic of the CRT if the worst should happen.
The Solution: Wealth Replacement TrustsThat common tool is called a Wealth Replacement Trust and, used in tandem with a Charitable Remainder Trust, it has two key use cases. First, it can protect your money and make sure it will make it to your heirs if you die during the term of the trust. And second, it can "replace" any wealth that is ultimately transferred to the charity of your choice when the trust ends.
In practice, this means that you can choose the best structure for you—often, a lifetime Charitable Remainder Trust—to minimize the taxes you pay on your highly appreciated asset, maximize your charitable deduction, and avoid any reduction in the wealth you are able to pull out of the trust.
How It WorksHow does Wealth Replacement Trusts work? It's pretty simple: You can purchase a life insurance policy that covers whatever portion of the trust's assets you want to guarantee. Say you put $5 million into a lifetime trust, and you expect it to pay out $20 million over your lifetime. You could buy a policy covering as much or as little of those amounts as you want. Say, for example, that you wanted to make sure you didn't lose your initial $5 million investment if you get hit by a bus. You can buy a $5 million term life insurance policy to cover that amount (and, all the while, you can take your planned distributions from the trust, so that you and your family end up with much more than that $5 million back no matter what). And because the life insurance policy is owned by the trust, the proceeds of the policy will generally not be subject to estate taxes at either death.
The logistics, moreover, are straightforward: You can pay for a wealth replacement trust/life insurance policy using (1) a portion of the income from your CRT, (2) the tax deduction you get when you set up the CRT, or (3) cash out of your pocket. (Premiums vary depending on your situation, but they tend to be around $400-500 per million dollars of coverage.
ConclusionIn the end, the Wealth Replacement Trust will allow you to sell a highly appreciated asset (like startup equity or cryptocurrency), defer your income (that is, capital gain) taxes, guarantee an income stream from the trust, and ensure that your wealth is transferred to your intended beneficiaries without triggering estate tax concerns.
0 Comments



Leave a Reply.

    Author

    My name is Dan Hopwood and I first started my career in the insurance business back in 1988.  2023 will be the start of my 35th year in the business. 

    Archives

    March 2023
    February 2023
    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    March 2021
    February 2021
    January 2021
    November 2020
    August 2020
    July 2020
    June 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    July 2019
    May 2019
    April 2019
    December 2018
    November 2018
    September 2018
    August 2018
    June 2018
    May 2018
    April 2018

    Categories

    All

    RSS Feed

Powered by Create your own unique website with customizable templates.