Saving Taxes On The Sale Of A Farm Or Ranch With A Charitable Remainder Trust

What is a Charitable Trust?
What is a Charitable Remainder Trust?
What is a Charitable Remainder Uni-Trust?
What is a Charitable Remainder Annuity Trust?
How Does a Charitable Remainder Trust Work?
How Can a Charitable Remainder Trust Save Taxes On The Sale of a Farm or Ranch?
Can a Charitable Remainder Trust Save Taxes On The Sale of Livestock and Equipment?
Does a Charitable Remainder Trust Provide Income for Retirement?
What types of non-profit organizations qualify for a Charitable Remainder Trust?

These are common questions people ask when selling a farm, ranch or other appreciated property.

A charitable remainder trust (CRT) enables you to avoid or defer tax on the sale of appreciated property and generate lifetime income for retirement.  In addition to saving taxes and generating a lifetime income, a CRT provides several other benefits:

  • Potentially reduces estate taxes.
  • May generate an immediate income tax deduction and a state income tax credit
  • Provides a vehicle to diversify assets for retirement income.
  • Help support your favorite church and/or charities.
  • Allows you to leave behind a lasting legacy.

How it works

A donor establishes a CRT and then transfers appreciated assets (e.g., land, livestock, equipment) to the trust, removing the assets’ values from the donor’s estate.  The trust then sells the assets and, since it is a tax-exempt entity, there are no taxes due upon the sale.  The proceeds from the sale are then invested within the trust in a manner designed to provide a lifetime income for the beneficiaries.  Two sets of beneficiaries are established, the income beneficiaries (generally the donor and his or her spouse), and the remainder beneficiaries (the charity or charities that will receive the principal, or “remainder”, of the trust after the income beneficiaries die.)

One does not have to contribute their entire farm/ranch in a CRT.  A portion of land and/or livestock and equipment may be contributed to and sold by a CRT with the rest of the property sold for cash, and/or through a 1031 exchange.  Combining a CRT with a direct sale and a 1031 exchange may offer the best combination of benefits.

Click here to view the Wealth Guide: Charitable Remainder Trust A Valuable Financial Tool For The Agricultural Family

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