CRT DESIGN & IMPLEMENTATION

A well-designed CRT incorporates maximum flexibility and after-tax value for the donor. This usually means the trust should span for the longest duration possible and allow for periods of income deferral. Unfortunately, most CRTs aren't designed to do either.

Beyond the Basic CRT

At CRT Experts, we help legal, tax and financial advisors implement CRTs for their clients that incorporate the full range of flexibility provided under Section 664 of the Internal Revenue Code.

Above all, we look at CRT design from the point of view of the

property owner – the wealth producer – first.

While this might sound like a given, many CRTs in existence today were promoted by charities. But the charity’s motivations concerning a CRT are often the opposite of the donor’s – charity wants as much money as possible and as soon as possible.

In other cases, while well-intentioned, the professionals involved with creating the CRT didn't have the necessary specialized experience and were simply unaware of the full range of flexibility available.

Whatever the reason, the end result is the same. Flexibility that the donor would have chosen to include had they been made aware of the opportunity to do so was not utilized.

Optimized CRT Design

Two features are particularly underutilized when

designing CRTs:

Trust duration: using the "lives plus term"

structure to maximize number of family members/

generations who the trust will benefit

Income deferral: using one of several techniques (often a variable annuity, partnerships or single member LLC) to give beneficiaries who don’t want or need the income the ability to defer it to future years.

Trust Duration
A CRT can be structured so that after the donor and spouse die, the donor's children can receive the income. In many cases, after the children die, the donor's grandchildren can also receive income. The expected life of most CRTs can be fifty to sixty years.

Income Deferral
A properly constructed and properly managed CRT can provide for periods of tax-free deferral when no payments are made to the beneficiaries and the trust assets grow tax-free. This can significantly increase the income paid to future beneficiaries while reducing the taxable income of current beneficiaries.

To learn more about building CRTs for maximum flexibility, please call us at 703-520-2275 or email us at experts@crt-experts.com.

CRTs as "Stretch IRA" Substitutes

Without planning, the SECURE Act requires heirs to withdraw and pay tax on an inherited IRA within ten years. The IRA owner must take action during his or her lifetime, but if implemented correctly, designating a CRT as the beneficiary of an existing IRA can restore the "stretch" the SECURE Act took away.

Problem: SECURE Act killed the old “Stretch” IRA

IRA beneficiaries are required to deplete all IRA assets within a 10-year period. Distributions are taxed at the highest applicable rates.

Solution: Charitable Remainder Trust

Full value of the IRA goes into the trust, with no income tax. This restores the “stretch” and

maximizes family wealth and income.

Key Benefits:

Preserves pre-tax dollars invested in a tax-free account
Heirs get significantly more spendable income
Assets are protected from creditors
Income is available for up to three generations
Fully flexible during client’s life
Simple to implement

For more on using a CRT as a "stretch IRA" substitute call 703-520-2275 or email us at experts@crt-experts.com.

"Stretch IRA" Substitute Webinar

On a recent webinar, Evan Unzelman, founder and CEO of CRT Experts, discussed how it works, where it's a fit, and how the planning is implemented. Click the link to view the webinar.