A client was in the process of selling a house that her parents had given her. Because of its unique location, she had been able to negotiate a sale price of $3.4 million, all of which would be taxed as long-term capital gains. However, as she lived in New York City, the combination of Federal, state, and local taxes would have resulted in a tax bill of over $1 million dollars. We considered different options for reducing her tax bill. As the client was charitably minded, we recommended placing the house into a Charitable Remainder Unitrust (CRUT) before the sale took place.
We found her an attorney to set up the trust with her as the income beneficiary, and located and helped her contract with a trust organization that would oversee all of the transactional work and tax filings for the trust. We established a trust investment account for the assets resulting from the sale and managed the investment in a way that reduced ongoing taxes for the client from the periodic distributions to her. The result was that she sidestepped a $1.2 million tax bill, had a source of low tax rate income for life, and could select and change the 501(c)(3) organizations that would receive the balance of her CRUT when she died.
