Terminating Your Interest in a Charitable Trust

By Jason S. Palmisano August 25, 2020Estate & Trust Law

A charitable remainder trust (“CRT”) is typically established as an irrevocable trust with an income stream reserved for the person who creates the trust (“the grantor”). When the income stream terminates, the remaining interest in the trust is donated to a charity. A significant benefit of a CRT is that the grantor is entitled to an income tax deduction calculated on the value of the remainder interest to be distributed to the charity.

But what happens when something has changed in the grantor’s life since they established a CRT and they no longer want or need the income stream? For example, the grantor may be going through a major life event such as a divorce, remarriage, or death of a spouse. Or the grantor may be seeking liquidity or interested in leaving more money to their heirs or simply tired of the administrative hassle and expense of the CRT. One option is for the grantor to sell his or her income stream.

An individual’s income stream in a CRT is a capital asset that can be bought or sold just like any other capital asset such as stocks, bonds or real estate. Since 2000, a substantial private market has developed to buy and sell CRT income interests and reports are that sale activity for CRT income interests has surged in 2020. Generally, the sellers of their income streams are worried about their own mortality due to the COVID-19 virus and a desire to have liquidity on hand during these uncertain times and stock market volatility.

When an income stream is sold, the price is determined by computing the present value of the interest. A surprising number of individuals are seizing the opportunity to adjust their risk profile to the markets by selling their CRT income interests. If you have an income interest from a CRT and are interested in learning more about terminating the interest, please contact PLDO estate and trust attorney Jason S. Palmisano at 561-362-2030 or email jpalmisano@pldolaw.com. Attorney Palmisano will review your situation and forge a plan that can help achieve your goals.

 

 

 

Disclaimer: This blog post is for informational purposes only. This blog is not legal advice and you should not use or rely on it as such. By reading this blog or our website, no attorney-client relationship is created. We do not provide legal advice to anyone except clients of the firm who have formally engaged us in writing to do so. This blog post may be considered attorney advertising in certain jurisdictions. The jurisdictions in which we practice license lawyers in the general practice of law, but do not license or certify any lawyer as an expert or specialist in any field of practice.

 

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Jason S. Palmisano is a Senior Counsel with Pannone Lopes Devereaux & O'Gara LLC and a member of the Estate and Trust Planning, Administration and Litigation Team. He focuses his practice on counseling clients in all areas of trust and estate planning and administration, Elder Law and guardianship law, Medicaid planning, disability planning and probate administration.

Attorney Palmisano has significant experience advising clients on wealth management, asset protection, charitable giving strategies and in all matters of tax planning, including multinational tax and advising clients on business and succession planning. In addition, his practice includes preparing a wide variety of trusts, including grantor, irrevocable life insurance, special needs and qualified personal residence trusts, among others.

Prior to his legal practice, he was a Campus Director for Athletes in Action, where he provided leadership training and led charitable giving campaigns.

Attorney Palmisano earned his J.D. from Samford University, Cumberland School of Law, cum laude, his LL.M in Taxation from the University of Florida Levin College of Law and a B.S. in Math Education from the Miami University in Ohio.  He is licensed to practice in Florida and is a Florida Bar board certified lawyer in wills, trusts and estates law, which is a highly regarded designation that recognizes member-attorneys for their high standard of professionalism, ethics and special knowledge, skills and proficiency in practice areas.

To contact Attorney Palmisano, call at 561-362-2034 or email jpalmisano@pldolaw.com.  

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