Estate Planning

Tired of Your CRT? Sell It!

By Gregory Herman-Giddens

If you set up a Charitable Remainder Trust (CRT) in the past but now wish you could get a lump sum back from the trust, it may be possible to sell your interest in the trust.  In a 2001 Private Letter Ruling (200127023), the IRS ruled that the sale of an income interest in a trust is a sale of a capital asset.

Thus, a CRT income beneficiary who has had that interest in the CRT for a year or longer can, in many cases, sell their interest and pay taxes at the current 15% long-term capital gain rate.  (State taxes would be additional).

Given that the capital gains rates are at historically low levels, this can be a way to turn a long term income interest into a lump sum that can be enjoyed currently, while avoiding potential future increases in tax rates.

There are companies that will purchase interests in trusts, including CRTs.

Full post as published by North Carolina Estate Planning Blog on July 24, 2008 (boomark / email).