CRUT funded with 5-yr deferral investments | Ed Slott and Company, LLC

CRUT funded with 5-yr deferral investments

Have client with approx. 300k in inherited investments with a cost basis of approx. 100k. The accounts are under the 5-yr deferral option that allows them not to take any distributions until the 5th year of the death of decedent.

a. Can they use this money to fund a CRUT for their charities, receive an income and receive a tax deduction?

They are worth north of 5M and need some tax deductions along with funding their favorite charities. They are in FL.

Thank you,

  • It sounds like an investment-type annuity.  There's usually no good solution to an investment-type annuity.  Often the best thing is to take it over 5 years so as avoid the ongoing costs and to avoid continuing to convert qualified dividends and capital gains to ordinary income without bunching all the income into one year.
  • It might have made sense for the decedent to have left the annuity (if that's what it is) to a charitable remainder trust.  The CRT could have cashed it in without any immediate tax consequences since it's tax-exempt.  Distributions to the beneficiary of the CRT would generally be taxable but over many years.
  • Fortunately since your client is worth over $5 million this is a small portion of his/her assets.
  • I'm admitted in Florida and practice actively in Florida.
  • Bruce Steiner, attorney

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