The world witnessed a tidal wave of historic moments in 1969. The moon landing, Woodstock, the premiere of Sesame Street, to name a few. During such a monumental year, the establishment of charitable remainder trusts (CRTs) going under the radar is understandable. Over the decades, however, this charitable estate planning tool has become a popular option for donors looking to make their contributions go even further.
In Boone County, the Kruses are among many Nebraskans using a CRT to gain income and build a legacy. Kurt, a semi-retired farmer from Albion, serves on Nebraska Community Foundation’s Statewide Board of Directors. His wife, Jerene, is a retired art teacher who now spends much of her time in her home studio creating hand-built pottery shown in galleries across the state. Both are very involved in Boone County civic life. They wanted their legacy to complement that dedication.
After much research and conversation, the Kruses opted to utilize a charitable remainder unitrust (CRUT) in their estate plan. A CRUT is desirable because it offers donors a stream of income in the form of a fixed percentage of the trust’s value paid to donors (or other selected beneficiaries) every year. At the end of the term, whatever remains in the trust is donated to charitable organizations of the donor’s choice.
For the philanthropically minded, a CRUT is a “win-win,” Kurt said. When an appreciated asset (like land, a business, securities, ag commodities, equipment, or collectibles) is placed in a CRUT, any sale of that asset is made without capital gains tax. This means that any remainder that goes to charity will likely be larger than had the asset been sold and taxed in the usual manner. And, because the assets within the trust are revalued on an annual basis, payments can increase over time. The Kruses’ income, for example, was double the amount of the rent they were receiving on the land they transferred to the CRUT.
If a donor transfers $1 million worth of land to a CRUT, it maximizes the philanthropic potential of the asset. Had they sold the land outright, they could pay upwards of $200,000 in taxes. That would reduce the investment amount significantly, decreasing annual income and, ultimately, the size of any charitable gifts in the future. The donor has the flexibility to name multiple charities to benefit from the remainder of the trust. The Kruses selected 10 different organizations as beneficiaries of their CRUT, but they have the freedom to change how much each receives and the option to add or remove recipients.
“You get income and tax advantages, and you still have a nice nest egg for charity when all is said and done,” Kurt said.
When it comes to making larger gifts, the sheer amount of giving options can be overwhelming. Nebraska Community Foundation recommends speaking with a professional advisor or expert to discover what options work for you and your family. That way, you can become like Kurt and Jerene Kruse of Albion: excited about the impact your generosity will have on the place you love for many years to come.
Nebraska Community Foundation has extensive (and free) resources to help one familiarize with the many ways to make a charitable planned gift. Visit fivetothrivene.org to learn more about how you can create your own legacy in the place you love. Click on the “Transfer of Wealth Toolkit” for a free guide called “Planning Your Legacy.”
If you would like to speak to an NCF representative, you may contact Todd Mekelburg at tmekelburg@nebcommfound.org, (402) 323-7343 or Becky Ries, bries@nebcommfound.org, (308) 730-1048.
