Charitable Giving Information

Charitable Remainder Trust Benefits

Question: What are the glitches to using a Charitable Remainder Trust to flip properties in order to avoid capital Gains

I am looking to get any insight I can from individuals who use and are familiar with the advantages and disadvantages of a CRT since I am considering starting one to flip properties with.
How Is the annual payout calculated?
Who must it pay out to? Is it me or the charity during my lifetime? After Death?
Can I pass it on to my kids and if so for how many generations before it has to go to a charity?
Can the Charity be a Charitable Family Foundation and if so How much can a Family Foundation pay out in salaries and how much must it pay to charity each year.
What type of charity’s qualify. Is a church donation considered a charity?
Also how is a CRT treated for tax purposes?
What mistakes could cause me to undo any tax benefits that the CRT might otherwise have?

Please help!
Clueless and Curious,
Manny Lindo

Answer: A CRT is a complex vehicle that can be very valuable when used in the right circumstances. It can't be used as an active trade or business (selling property continuously may be considered a business. The annual payout is calculated based on the fair market value of the assets and the specified rate in the trust document, this is prorated for any mid year contributions. The CRT would pay to you for life an depending on ages and payouts rates to your kids for a term of years or for their lives. At the end of the trust term the assets would transfer to charity, this could be a Family Foundation but the initial tax deduction may be reduced to the reminder interest of the basis depending on the assets contributed. The amount of money family members could take as a salary would depend on the value of the foundation and how much work was being done on behalf of the foundation. The CRT is tax exempt but distributions are taxed on a worst in first out philosophy. The most important thing to avoid that could undo tax benefits in a given year is a CRT can't have any debt financed income.

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