One problem many older Americans have, is that they would like to retire, move or just downsize. However, the tax consequences of doing so can be difficult to get around.
An elderly couple that has lived in the same home for decades would have to pay capital gains taxes, if they sell the home. This could make it more difficult to sell the home and have the money to move somewhere else.
One way around this problem is to create a charitable remainder trust.
This is an irrevocable trust in which people can place assets without a tax penalty. The trust settlor can continue to control the assets and draw an income from them. Anything left in the trust after the settlor passes away, goes to charity.
However, charitable remainder trusts have some dangers, as the Wills, Trusts & Estates Prof Blog explains in “The Charms and Dangers of the Charitable Remainder Trust.”
The IRS scrutinizes charitable remainder trusts very closely.
The agency requires that at least 10% of the assets put into the trust, ultimately go to charity. If that does not happen, there can be steep tax penalties.
To help facilitate this, the IRS requires that the trusts be monitored for possible exhaustion of funds during the settlor’s lifetime. If the trust is in danger of exhaustion, it is dissolved and the settlor will face severe tax penalties.
Charitable remainder trusts can be a great tool. However, because of the drawbacks, they should only be considered upon the proper advice of an elder law attorney.
Reference: Wills, Trusts & Estates Prof Blog (Dec. 29, 2017) “The Charms and Dangers of the Charitable Remainder Trust.”
I heard Cindy’s presentation at a Senior Luncheon at my church, and was very impressed. She helped my daughter and me understand many aspects of elder law. Josh has also been very helpful in my planning to enter an independent living situation . I have told many friends about them.
The very best elder law attorney and staff anyone could ever ask for! I have referred a number of clients to Cindy and she never disappoints. She is kind, caring, and extremely thorough in making sure everything is completed as it should be. I highly recommend Cindy for anyone needing lawyer services; she truly goes above and beyond for every client she helps and has had a huge impact in so many peoples’ lives. Thank you, Cindy and staff, for everything that you do- I’m so glad to know you!
Cindy and the Nelson Elder Care Law team are trustworthy and helpful. They are the experts in elder care law. At Leaf Cremation, we entrust our families to the care of the Nelson team when their services are needed.
Josh Nelson, and his staff, have been amazingly helpful to our family. The ins and outs of nursing homes, the rules and regulations that govern Medicare and Medicaid are daunting and the folks at Nelson Elder Care Law have been informative, responsive, and above all, empathetic. I cannot emphasize enough how their service has taken a weight off of our shoulders especially during a world pandemic that has targeted nursing homes across our country. I highly recommend retaining Josh and his firm!
I had a simple legal question to them that I needed answered and they very helpful in giving me the information I needed. I highly recommend them and will reach out to them if I need more advice or assistance. Thank you for taking your time to just answer a couple of questions I had!