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I had a 1099-C for about $135,000. My husband didn't have any withholding on Social Security. His employer couldn't withhold due to incompetence. I felt utter dread wash over me. Memories of owing the IRS before were constantly on my mind. I called a local CPA. Besides being clueless, he wanted to charge me for every question I had about insolvency. I looked on line and found little hope of the countless stories of permanently disabled people like myself getting their student loans forgiven only to be asked to pay taxes on it as if it were income.
Somewhere, somehow, I find an article by Gary Bode. I bookmarked it for when it's time to do the actual taxes. With his excellent help in how to do all of this out of a virtual office I get my part of the work done. My questions got answered, for free. I give a retainer, do what I said I did and wait. I hear from Gary. I go into shock! How can this be? Not only do I not owe on the 135,000....Gary itemizes and after paying what was almost nothing in taxes we get $950.00 back! No more hubby doing the taxes online! I will use Gary Bode as long as he will agree to work with me!
It was so easy, no worries, but professional and top notch. I know I have thanked you Gary but I am so grateful. Thank you ever so much again!

Carla Bray

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CPA discusses Charitable Remainder Trusts and Charitable Lead Trusts | 2012

A Wilmington, NC CPA discusses split interest charitable Trusts

We're a CPA firm with a virtual office to accomodate long distance clients. For a free phone consult call (910) 399-2705.

With charitable giving becoming popular as part of estate and/or retirement planning, here is an overview of the most popular charitable/retirement (Estate) combination Trusts. I think most of us want to know our retirement is appropriately funded before supporting a charitable cause.

“Charitable Remainder Trusts (CRTs) and Charitable Lead Trusts (CLTs) are mirror images of each other.”
-Gary Bode, Wilmington NC CPA

Both are irrevocable, split interest Trusts of less than 20 years duration. The split interests are a) some charitable institution and b) the donor (or the donor’s heirs). Both CRTs and CLTs come in two distribution variations: a fixed dollar annuity, and, a fixed percentage of the Trust’s fair market value, as primary pay out amounts. CRTs pay a fixed annuity amount (CRAT), or fixed percentage of the trust (CRUT), to the donor first, with the remainder going to charity. CLTs pay a fixed annuity amount (CLAT), or fixed percentage of the trust (CLUT), to the charity first, with the remainder going to the donor. A CRAT would be appropriate when guaranteed amounts are needed for retirement, or desired as bequests to heirs.

Potential tax benefits of CRTs and CLTs include:

  • They are tax exempt at the Trust level.
  • The donor receives income and gift tax deductions for the year of actual contribution.
  • Low basis assets that have appreciated, like real estate that has increased in value, can be transferred into them and then sold without incurring any income tax.

Additional wording in IRS Revenue Procedure 2007-45, for CLTs, allows for increasing the annual annuity amount, or the percentage of the trust, to the charitable institution over the term of the trust. So the IPCLAT is an Increasing Payment Charitable Lead Annuity Trust.  An article in the July 2010 Journal of Accountancy suggests an application of the IPCLAT is to allow growth of principal in the early years of the trust, with hopes of the economy improving.

The entire acronym jungle of split interest charitable trusts has one obvious concern for anyone considering them as a retirement vehicle: make sure your personal needs for retirement will be met before funding charitable concerns.

Feel free to call us for a free phone consult at (910) 399-2705.

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