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Capital Gains Bypass Trust

What is a Capital Gains Bypass Trust

A Capital Gains Bypass Trust, or as more commonly referred to as a charitable remainder trust, (CRT), is a trust designed to help you keep more of your money by giving it away.

By forming a Capital Gains Bypass Trust you place appreciated assets in the trust and get a charitable deduction to reduce the income taxes you owe for the year the trust is created. The trust then can sell the appreciated property without paying any capital gains on the profit. Therefore, what is reinvested is 100% of the sales price. The trust can be tailored so that the revenue that its assets generate is passed along to you or whomever else you wish. When you die, what's still left in the trust must go to the charity you have selected.

Capital Gains Bypass Trust will give you the following benefits:

  • Bypass Taxes on Capital Gains
  • Increase your Retirement Income
  • Increase your Tax Deductions
  • Decrease your IRS Taxable Estate
  • Help Charitable Organizations.

By using a CAPITAL GAINS BYPASS TRUST with a combination of a Family Foundation and a Tax Free Inheritance Trust you can eliminate capital gains, increase your income for life, increase an income stream for your children’s life, reduce your estate taxes dramatically and create a 100% tax free inheritance for your children.

Tax Consequences

When choosing a Capital Gains Bypass Trust, a significant current income tax deduction is often created that can usually be carried forward for 5 additional years. When the trust assets are invested, the resulting income is almost always higher than it would have been before the transfer. This occurs because the typical asset given to a Capital Gains Bypass Trust is a portfolio of stocks, mutual funds, raw land or similar assets with a low cost basis and which are typically low income producers. After the tax-free sale of these highly appreciated but low income-producing assets, the resulting portfolio can be invested in assets that produce higher income under the direction and control of the trust maker acting as trustee.


What are the steps involved?

First you must determine what your tax deduction, capital gains savings, and level of income to you will be from the use of a Capital Gains Bypass Trust. Should the structure benefit you, you will transfer appreciate property (stocks, bonds, property) into the trust. Control of the trust will remain with you, as the trustee. The trust then, because of its charitable nature may sell the appreciated property and pay no capital gains on the sale. The tax free sale will mean that a greater amount of money is left to invest, and a greater stream of income will be due you as the income beneficiary of the trust. Upon you and your spouses death, a “charitable organization” will receive any funds remaining in the trust. This “charitable organization” may be your own Private Foundation.

It may also be advisable to establish a Tax Free Inheritance Trust with a portion of taxes saved from your tax deduction in creating you Capital Gains Bypass Trust. This can own a life insurance policy of sufficient size, to provide additional income 100% free of estate taxes to your children, grandchildren or family members.

What's your next step?

To learn more, or to determine the benefits you will receive you can request a private consultation, attend one of our upcoming scheduled Conferences , or purchase Literature on the subject .

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