A Charitable Remainder Trust (CRT) can indeed be strategically created to co-fund research with a university, offering a powerful combination of philanthropic giving and potential tax benefits. This approach allows individuals to support vital research initiatives while simultaneously providing income for themselves or other beneficiaries. CRTs are irrevocable trusts that transfer assets to the trust, providing an income stream to the beneficiary for a specified period, with the remainder going to a designated charity – in this case, a university or a foundation supporting its research. The IRS provides specific guidelines regarding the creation and operation of CRTs, ensuring they meet the requirements for charitable deductions. According to the National Philanthropic Trust, in 2022, charitable remainder trusts accounted for $7.93 billion in total charitable contributions.
What are the tax benefits of using a CRT for research funding?
Establishing a CRT for university research offers several compelling tax advantages. Donors typically receive an immediate income tax deduction for the present value of the remainder interest that will eventually benefit the university. The amount of the deduction is calculated based on IRS tables, considering the donor’s age, the payout rate, and the fair market value of the assets contributed to the trust. Furthermore, capital gains taxes on appreciated assets transferred to the CRT can often be avoided, freeing up more funds for research. For example, a donor contributing stock worth $500,000, that has a cost basis of $100,000, could potentially avoid paying capital gains taxes on the $400,000 appreciation. However, the income received from the CRT as a beneficiary *is* taxable as ordinary income.
What types of assets can be used to fund a CRT for research?
CRTs are remarkably flexible in the types of assets they can accept. Common assets used to fund CRTs include cash, stocks, bonds, mutual funds, and other publicly traded securities. Real estate and closely held business interests can also be contributed, although these may require special valuation considerations. A client, Mr. Abernathy, a retired engineer, once approached Steve Bliss with a substantial stock portfolio he wanted to use to fund Alzheimer’s research at UC San Diego. He was hesitant about relinquishing control of his assets, but understood the potential tax benefits and his desire to contribute to a meaningful cause. Steve guided him through the process, ensuring the CRT was structured to meet both his financial goals and the university’s research needs. “Many people find comfort in knowing their assets are still working for them, even while supporting a cause they care about,” Steve often explains.
What happened when a CRT wasn’t properly structured?
I recall a case where a woman, Mrs. Gable, attempted to create a CRT without seeking professional legal counsel. She self-drafted the trust document, intending to fund cancer research at a local university. Unfortunately, her trust lacked key provisions required by the IRS, specifically regarding the qualified charity requirements and proper valuation of the assets. The IRS subsequently disqualified the trust, denying her the anticipated tax deductions and creating a significant tax liability. She was devastated and faced penalties, as well as the added stress of rewriting the trust and dealing with the IRS. This situation highlights the critical importance of working with an experienced estate planning attorney to ensure the CRT is properly structured and compliant with all applicable regulations. It’s a costly lesson learned that underscores the need for professional guidance.
How did proper planning save the day for a family funding research?
Fortunately, we were able to help the Peterson family avoid a similar fate. Mr. and Mrs. Peterson, passionate about supporting pediatric heart research, wanted to establish a CRT to fund a new lab at a children’s hospital. They came to Steve Bliss with a detailed plan and a significant portfolio of real estate. Steve worked closely with them, advising on the optimal trust structure, asset transfer strategies, and charitable provisions. He also coordinated with the hospital’s development office to ensure the funding aligned with their research priorities. The CRT was successfully established, providing the Petersons with a reliable income stream and enabling the hospital to build the state-of-the-art lab. Years later, they received updates on the groundbreaking research being conducted in the lab, and were overjoyed to know their generosity was making a real difference. This exemplifies how meticulous planning and professional guidance can transform a philanthropic vision into a lasting legacy.
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About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
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Feel free to ask Attorney Steve Bliss about: “What estate planning steps should I take if I own a small business?” Or “Can I avoid probate altogether?” or “What are the disadvantages of a living trust? and even: “What are the different types of bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.