Charitable Gift of High Income Producing Asset

Charitable Gift of High Income Producing Asset

Forum topic posted in Forum on 19 June 2009| 1 comments
audience: | last updated: 19 June 2009
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Joined: 06/19/2009
Points: 30
Client has received solicitation to purchase CGA, and client is favorably disposed to benefitting the charity. However, Client would be required to sell a high income producing asset - Generates about 20%/yr income stream, independent of the market value fluctuation of the asset. It is a liquid security, not real estate. Client is interested in sharing income stream with non-profit (eg. 10%for owner and 10% for charity), and sharing a portion of the residual value @ client's death. Client is 65. Liquidating an asset that generates an annual payout of 20% in exchange for a CGA would appear to be foolish, yet the client is favorably disposed to benefitting the charity. How could the asset be retained, yet benefit the client and the charity? (Change of ownership of asset would certainly acceptable) The client is very willing to share the income stream and the residual at death with the charity. Initial input is for the client to gift the asset into two trusts - CRT and CLT. This approach would generate annual cash flow of 10% to donor and 10% to charity during lifetime of donor, with CRT residual passing to charity @ donor's death. Client would receive some tax benefits. Also suggested, to make the CLT for a finite period of years, for reasons at this point unclear. Input would be greatly appreciated. CLWright

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Joined: 05/08/2009
Points: 30
Charitable Gift of high income producing asset
I like the idea of a CRT since the asset may have a limited usage or life (it could be sold, burnt down etc) and the income stream could certainly be affected. A lead CLT for a limited amount of time could work and of course could be redone if everything is working fine at the end of the term. What about family inheritance issues? Are there heirs? What about using some of the income stream (20% does seem a bit risky today) and purchasing Life Insurance in an ILIT to either further benefit charities or replace the asset for the heirs if there are any? A 20% income stream seems like a lot of money to not fully utilize its potential for charitable purposes. Cory Freeman
7520 Rates: June 3.4% May 3.2% April 3.2%

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