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How a Charitable Remainder Trust Maximized Our Real Estate Investment (And Lessened Our Landlord Obligations)

By: Bob and Birdie Feldman, Real Estate Property Owners  


As apartment owners, we face many challenges, especially today. Even using a management company, being a landlord is demanding work. After more than 45 years of ownership, we decided it was time to retire and started looking for ways to simplify our lives and spend more quality time together on our boat. Suddenly, we had new problems to work through — taxes and retirement income. Specifically, capital gains tax due on the sale of our building was going to severely reduce our funds for retirement.

 

We could have deferred capital gains tax by investing the proceeds of the sale in a less labor-intensive property in a 1031 Exchange, but our goal was to be free of investment property obligations. As we reviewed tax-saving strategies, one that we hadn’t considered stood out, the Charitable Remainder Trust (CRT). After researching extensively and consulting with our financial advisor, we made the decision to establish a CRT with one of our properties.

 

If you’re not familiar with the CRT arrangement, it isn’t as complicated as you might think. Once the CRT is established, you transfer the property into the trust. Because it is a charitable entity according to the IRS, the trust can then sell the property without paying capital gains tax on the sale and invest the proceeds. We were able to create a new source of lifetime income that’s greater than the net rental income we were receiving from the property. An added bonus was that we received a nice tax break in the year we made the gift and for up to five additional years to help offset other tax liability.

 

We served as trustee of the CRT and worked with our real estate agent to sell the property after we donated it to the trust. This enabled us to have full control of the sale and maximize the proceeds, which were used to establish our CRT. If something happens to one of us, we have the peace of mind of knowing that the other will continue to receive the income for his or her lifetime. We are very happy with the terms of our CRT, which align perfectly for funding our retirement years. Even the process was simple — we closed the deal while traveling on our boat.

 

At the end of our lifetimes, any funds left in the trust will become a gift to the charity. We know that the money will be used to do wonderful work for a cause we care deeply about, City of Hope, a world-class cancer research and treatment facility based in Los Angeles. A friend had been treated there, and when we looked into their facilities, we knew that was where we wanted our money to go.

 

A CRT was a smart financial choice for us that will provide benefits for years to come. We’re so happy with how it turned out, we’ve donated more properties since the first one. We hope our story inspires other property owners. It's a way to sell a property without paying a lot of taxes, get money for the retirement of your dreams and realize your charitable goals.

 

 

Bob and Birdie Feldman have a mutual love of boating and are never happier than when they are at sea. If you’d like to speak with Bob to get more of his perspective as a CRT donor, you can reach him at admiralmarine1@aol.com. If you do think a CRT might be a tax-smart option for you, feel free to reach out to a City of Hope specialist at 800-232-3314 or plannedgiving@coh.org, who can explain the process without any obligation to make a gift. 



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