The charitable remainder trust and closely held business stock

The Charitable Remainder Trust (CRT) is one of the most tax-advantageous tax planning strategies available today. Not only does it allow an individual to enjoy substantial income and estate and gift tax benefits, it also results in a substantial gift to charity. Under current law, is appears that an...

Full description

Saved in:
Bibliographic Details
Published in:Journal of financial service professionals 1995-11, Vol.49 (6), p.82
Main Authors: Patterson, Gerald W, Jenei, Jeffrey J
Format: Article
Language:English
Subjects:
Capital gains
Cash flow
Charitable remainder trusts
Charities
Closely held corporations
Estate planning
Estate taxes
Families & family life
Family owned businesses
Federal court decisions
Gifts
Income taxes
Internal Revenue Code
Life insurance trusts
Limited partnerships
Remainder interests
Retirement income
Section 4941
Stock transfers
Tax benefits
Tax courts
Tax deductions
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:The Charitable Remainder Trust (CRT) is one of the most tax-advantageous tax planning strategies available today. Not only does it allow an individual to enjoy substantial income and estate and gift tax benefits, it also results in a substantial gift to charity. Under current law, is appears that an individual can use the CRT to effectively transfer the family business by making a gift to stock in a closely held business to a CRT, which is followed by a redemption of the stock from the CRT. When this occurs, wealth replacement is not the focus. The children have effectively received the value of the asset - 100% ownership of the family business. The cost, however, is the capital needed to fund the redemption. The note redemption approach may run afoul of the self-dealing rules under Section 4941. In states where a note can be used and where the client and his tax adviser conclude there is no violation of the self-dealing rules under Section 4941, key-man insurance may provide an effective way to fund the note redemption.
ISSN:1537-1816
2381-8875