Charitable Remainder Trust

Meet Ken and Irene. Ken and Irene have been married for more than 40 years and have been long-time annual supporters of Good Shepherd Housing and Family Services (GSH).  Ken and Irene have enjoyed successful careers and a loving family and are looking forward to a long, happy, and adventurous retirement together. Throughout their lives, the work of GSH has played an important role in their charitable giving, and they want to ensure GSH will continue its important work preventing homelessness long after they are gone.

Ken and Irene approached GSH to learn more about how they might make their long-term charitable goals align with the reality of their finances. Ken and Irene’s main interests were:

  1. Maximizing benefits to reduce their tax burden while alive, and, at the time of their passing, the tax burdens to their children.
  2. Generating income to support their retirement plans.
  3. Ensuring their estate plan would make a lasting impact for GSH, while also ensuring assets remained for their heirs.

Ken and Irene had the good fortune of a healthy stock portfolio they had always earmarked for retirement. A particular stock, originally purchased for $25,000, was now worth more than $150,000. They could sell the stock outright to fund their retirement, but upon doing so would pay a 15% capital gains tax amounting to nearly $20,000. Alternatively, they could consider drawing down on the earnings, but since they still own the asset, they would continue to pay gains taxes, receive no protection from creditors, and limit opportunities for charitable tax deductions.

Alternatively, a charitable remainder trust with GSH would allow Ken and Irene to donate the asset to a trustee (GSH), allowing them to take an immediate tax deduction for the full value of the fund. To solve their income needs, GSH will sell the stock, but as a tax exempt organization, can avoid capital gains tax, and reinvest the full amount. GSH will maintain the reinvested asset, but, assuming 5% in investment returns, will forward the more than $7,500 in annual earnings back to Ken and Irene to fund their retirement dreams. Ken and Irene can still plan to enjoy the dividends of their original investment while avoiding tax burdens. And because the assets are in an irrevocable trust, Ken and Irene have now protected the asset from creditors.

Upon their death, GSH maintains the full asset, which it can sell, tax free, for the full amount that will help provide housing and services for GSH clients for years to come. Ken and Irene’s children will still inherit property and other assets in Ken and Irene’s portfolio, while also knowing that their parents left a lasting impact on families and children in need.

Ken and Irene worked with their financial planner to put the paperwork in place-a surprisingly painless process. They are thrilled that the asset continues to provide for their retirement as they had planned all along, and take comfort in knowing it will someday make a tremendous difference for GSH.

Interested in Learning More?

If you think a Charitable Remainder Trust could be a good fit for you, we’d love to schedule a time to talk about options, details, and next steps. Please contact the Good Shepherd Housing and Family Services Office of Development via this form.