Charitable Remainder Trust (Flip NIMCRUT)

For Fred Tillman

A Conceptual Flow Diagram

The “Do It” vs. “Don’t Do It” Scenario

Benefit / Expense / CRT Strategy / Outright Sale
Attorney fees to create the CRT / -$3,000
Strategy design fees / -$13,000
Current federal income taxes avoided / + $106,120
($353,735 deduction X 30% income taxes)
Remainderment to Family Foundation at end of 5th year / + $478,000
Income from distribution of sale proceeds / + $1,300,000
Federal capital gains taxes avoided / paid on economic gain / + $15,000 / - $15,000
Federal capital gains taxes avoided / paid on recaptured accumulated depreciation / nil / nil
After-tax income from sale proceeds—1st year / + $182,000
($260,000 – 30% income taxes)
After-tax income from CRT—2nd thru 5th years / + $449,713
($642,448 before-tax income – 30% income taxes)
After-tax interest income from invested principal at end of 5 years / +$308,400
($1,285,000 X 6% X 4 years)
Sub Total / + $1,214,833 / + $1,593,400
Future federal estate taxes avoided / paid / + $315,856
($631,713 X 50% estate tax rate) / -  $796,700
($1,285,000 + $308,400 X 50% estate tax rate)
Net effect on assets / + $1,306,689 / + $796,700


The “Do It” vs. “Don’t Do It” Scenario

Assume the same situation with a:

-  $500,000 Economic Gain

-  $400,000 Recaptured Accumulated Depreciation

Benefit / Expense / CRT Strategy / Outright Sale
Attorney fees to create the CRT / -$3,000
Strategy design fees / -$13,000
Current federal income taxes avoided / + $106,120
($353,735 deduction X 30% income taxes)
Remainderment to Family Foundation / + $478,000
Income from distribution of sale proceeds / + $1,300,000
Federal capital gains taxes avoided / paid on economic gain / + $75,000
($500,000 – 15%) / -  $75,000
($500,000 – 15%)
Federal capital gains taxes avoided / paid on recaptured accumulated depreciation / + $100,000
($400,000 – 25%) / -  $100,000
($400,000 – 25%)
After-tax income from sale proceeds—1st year / + $182,000
($260,000 – 30% income taxes)
After-tax income from CRT—2nd thru 5th years / + $449,713
($642,448 before-tax income – 30% income taxes)
After-tax interest income from invested principal at end of 5 years / +$270,000
($1,125,000 X 6% X 4 years)
Sub Total / + $1,390,833 / + $1,220,000
Future federal estate taxes avoided / paid / + $315,856
($910,000 X 50% estate tax rate) / -  $610,000
($1,125,000 + $270,000 X 50% estate tax rate)
Net effect on assets / + $1,706,689 / + $610,000

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