The Gift of the Charitable Remainder Trust (CRT).
Back when you had the energy and time, being a landlord may have sounded like fun. Then perhaps, you hired a property management company or gave the responsibility of taking care of your property to a family member. Over time, the asset probably needed some work: a new coat of paint or repairing a refrigerator. But keeping a multifamily property looking new takes work; asphalt crumbles, rebar (if you have it) rusts and explodes; not to mention wooden structures and the termites who love them. Eventually, the repairs needed far exceeded the modest rental income you were able to collect from your tenants.
You may have considered selling your property at one point in time because you looked down the long road of your building’s life expectancy and saw that without the proper timely repairs, it would eventually most definitely need an expensive overhaul. But then you spoke to your tax consultant, who advised you about capital gains taxes. You may have conferred with your children, too, who planned on using that income for themselves once you were gone. Ah forget it!, you likely thought then, deciding that the headache of managing the property was less burdensome than the headache of selling it.
But cashing out of your investment property doesn’t have to mean that you pay a third of your gain to the IRS. What if your tax wasn’t deferred? What if it was bypassed? When you exchange into a property that has better income and is in better shape, you could consider a Charitable Remainder Trust. A CRT will allow you to reinvest your principal and receive constant income. It can also give you a pretty good tax deduction.
When you put your property into a CRT you can designate a charity close to your heart and receive a charitable income tax reduction while bypassing capital gains. You can also receive up to 50% variable income for your lifetime (up to 20 years).
And picture this: instead of leaving your kids with the headache of having an asset they now have to repair and manage, you leave them one that has a long life expectancy and lots of future depreciation. Plus, you help to find a cure for cancer or enable music programs in public schools. What about the financial legacy you leave your kids, you ask? You can replace the entire value of the donated asset or cover its remainder value. With a Wealth Replacement Trust in a Second to Die Life Insurance Policy your asset’s value can pass free of estate and income taxes, and it likely won’t be subject to probate, either! Additionally, the deduction your CRT accomplishes may offset a pretty big chunk of the insurance cost.
Of course, discussing this possibility with your tax consultant is imperative to leaving this type of legacy successfully. But if you feel ready to consider the possibility of exchanging into a more cost-effective asset; one that suits your current needs and goals, there’s no time like the present to start giving to the future. Call Commercial Investment Strategies at 808-429-1098 to find your present property’s value and how to exchange it into a future you can be proud of.