Reynolds T. Cafferata

You bought it for $40,000 in 1960’s and its worth $4 million in the early 1990’s.

Low Tax Rates Few appreciated assets

Federal Ordinary Income 39.6% Federal Capital Gains 20% Medicare Surcharge 3.8% California 13.3%  (9.3% base, 1% millionaire tax, 3% Prop. 30)

2009 Dow 6627, 2013 Dow Residential House up 10%+ in some Markets from 2012 to 2013

Robert F. Sharpe & Co Research finds peak age for creating a CRT is 68 Next year the first baby boomer turns 68

Main benefit of a CRT is not the deduction Tax Exempt Status of CRT allows pre-tax reinvestment of sale proceeds The greater the appreciation and the greater the tax rate, the greater the benefit of the CRT Someone looking to turn an appreciated asset into an income stream will benefit from a CRT

Unitrust or Annuity Trust Lives in Being or Term of years up to 20 Assets remaining pass to charity

10% Remainder Value  Payout  Term  AFR 5% to 50% Payout Rate Annuity Trust must pass Exhaustion Test

Fixed Dollar Amount No Additional Contributions Allowed No Benefit to Beneficiary From Growth of CRT

Fixed Percentage Trust Revalued Annually Flavors  Standard  Net Income (Make-up)  Flip (Make Up) Beneficiary benefits from growth in value

Payments to Beneficiary Taxed under Four Tier Rule UBTI Taxed at 100% Cannot Be a Grantor Trust Debt can cause UBTI or Grantor Trust Status Cannot Hold S-Corporation Stock

Taxes reduce proceeds of sale of highly appreciated asset by 30% to 40% CRT can reinvest 100% of proceeds of sale of highly appreciated asset Beneficiary receives unitrust amount from 100% of proceeds of sale of highly appreciated asset

Long-term real estate, particularly after 1031 exchanges Founders stock Long-term stock Tangible property like art

Unitrusts that pay net income are limited to cash flow LLCs, Partnerships and annuities can control cash flow Flip trusts can have triggers based on a variety of events