In the realm of high finance, tax, and estate planning, one strategy stands out for its ability to balance philanthropy with family's financial security is: the Charitable Estate Replacement Plan (CERP).
A CERP is an advanced financial strategy that allows individuals to designate charities as beneficiaries of specified assets within their estates. This provides the opportunity for significant charitable deductions while allowing the ability to eliminate up to 99% of capital gains tax on appreciated assets. This type of plan can also create an additional revenue stream for the donor and heirs throughout their lifetimes.
Click Here to see a brief video explaining how it typically works.
Another unique feature of a CERP is the ability provide a steady, tax free income stream during your lifetime. There are multiple ways in which that assets equity can be accessed. Most commonly, and normally of the greatest financial advantage, is to use the asset as leverage and loan against it.
This may create concerns over how your charitable giving might affect your family or heirs. However, a CERP addresses this by using portion of the tax savings to fund a permanent life insurance policy. The life insurance proceeds, typically held in an Irrevocable Life Insurance Trust (ILIT), replace the value of the donated assets, ensuring your heirs receive their inheritance. This ensures you can maintain your lifestyle while supporting your charitable interests, without forgoing your heirs.
The key advantages of a CERP are, but not limited to:
- The ability to eliminate up to 99% of capital gains tax on appreciated assets
- Can current provide an income tax deduction which avoids up to 50% of your federal income tax (with a 5 year carry forward)
- Assets contributed grow in a 99% tax free environment
- Appreciated assets contributed can be sold or liquidated in a 99% tax free environment
- Assets are almost entirely exempt from gift and estate tax
- Assets are creditor and divorce protected
- Client and heirs maintain total control over the assets in a CERP.
- Client and heirs will make substantial charitable gifts to their preferred designated charities
This allows you to "plan for today while providing a better tomorrow."
The Charitable Estate Replacement Plan is a powerful tool for those who wish to balance their philanthropic goals with the financial security of their family and their heirs. By strategically planning your estate, you can make a significant impact on the causes you care about while ensuring your loved ones are well taken care of.
A Charitable Estate Replacement Plan allows you to can create a legacy that reflects your values, provides significant financial benefits for your family and heirs, and allows you to dictate how you'd like "would be" tax dollars are used instead of leaving it in the hands of the federal government.
Jesse Somdahlis the Director of Operations at Finance For Thought and can be reached through our office on our website.
Disclosures:
TAX- To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purposes of avoiding penalties that may be imposed by law. Each tax payer should seek tax, legal or accounting advice from a tax professional based on his/her individual circumstances.
TAXES- This material is for informational purposes only. Neither Finance For Thought, FFT nor its Representatives provide tax, legal or accounting advice. Please consult your own tax, legal or accounting professional before making any decisions.
Sources:
https://www.irs.gov/charities-non-profits/substantiating-charitable-contributions
https://www.irs.gov/charities-non-profits/private-foundations/charitable-trusts
https://www.irs.gov/credits-deductions/individuals/deducting-charitable-contributions-at-a-glance
https://www.nytimes.com/2012/02/08/opinion/the-zuckerberg-tax.html
https://www.irs.gov/pub/irs-pdf/p557.pdf
https://en.wikipedia.org/wiki/Capital_gains_tax
https://en.wikipedia.org/wiki/Premium_financing
https://www.irs.gov/individuals/net-investment-income-tax