Income From Trusts

How much income can you receive from a CRT or PAT?

That depends. With a CRT, for example, your income will be based on the amount of income your assets generate while inside the CRT, as well as the “payout percentage,” or the size of the payments you choose to receive.

The IRS requires CRTs to distribute a minimum of 5 % of the net fair market value of its assets annually. If you don’t need income from the CRT in one year, you can defer it through a “makeup provision,” but the CRT’s net distributions must eventually equal 5%. This means that you don’t have to start taking income right away.

In some cases, if you defer taking the income, you can potentially take more income out later than if you would have taken the distributions in the first place. One caveat here: The higher the payout percentage, the lower your charitable income tax deduction will be, so you’ll want to talk to an advisor about striking the right balance between the two.

I would strongly urge anyone considering a CRT or PAT to speak with a qualified estate planning attorney. Although the concepts as presented here are somewhat simple, the complexity of the taxation, along with one’s estate and income requirements, all need to be well factored into the decision making process.

This is not run of the mill type planning, and it definitely takes an experienced individual to assist you. That said, don’t be shy. A CRT or a PAT can be an excellent choice in helping you reduce taxes, create lifetime income and of most importance to some — leaving a legacy behind.

By: Wasserman, Phillip Roy. Lakewood Ranch, FL.

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