... continued from Cover
solving the loss of inheritance to the children, but that discussion is beyond the scope of this article.
Now, let’s look at the same scenario using the retirement accounts to fund the CRT. Instead of transferring an asset to the CRT while you are living, you name the CRT as the beneficiary of your retirement account, which would take place after you (and your spouse if you’re married) have passed away. When that transfer takes place, it is considered a charitable deduction. That means the value of the retirement account is not considered part of your estate for Federal Estate Tax purposes. Also, the 10-year withdrawal requirement is no longer applicable because all the funds in the retirement account(s) are transferred tax-free to the CRT. The children (or whomever you want) can be named as the beneficiary of the CRT, and they can receive a distribution annually, based on the same predetermined percentage discussed earlier. So, as an example, if we use the same numbers as mentioned above and if the children are named as the beneficiary of the CRT, the payment to the children would be an amount equal to 5% of the principal value of the assets every year for the rest of their lives. At first glance, this doesn’t seem like a big deal, but let’s look at the numbers. If a $1,000,000 inherited retirement account is paid out over 10 years, and each of the children has a combined (federal and state) income tax bracket of 30%, and we assume the same growth rate of 8%, the total amount that the children would receive, after taxes, would be $1,083,671. However, if the same $1,000,000 is transferred from the retirement account to the CRT upon your passing, and the distribution takes place over the lifetime of a 48-year-old child (same tax bracket, same rate of return), the amount paid out would be $6,905,224! That’s a difference of $5,821,553. Then, after the children die, the charity receives $5,143,134. This truly is a win-win-win. The owner of the retirement account doesn’t give up any benefits of the account, since the required minimum distributions stay exactly the same during their lifetime. The children receive over $5,000,000 more than they would have received had they withdrawn the funds over the 10-year period, and the charity receives over $5,000,000. The numbers provided are for illustrative purposes only, and your situation may be different (your situation could be better). If you would like us to run the numbers for you and compare naming a CRT against your current beneficiary designation, we would be happy to calculate the numbers for you at no charge. – John Preston
Solution on Pg. 4
Apple Tart With Rosemary and Honey Syrup Inspired by Delicious.com
Ingredients
• • • • • • • •
Frozen puff pastry, thawed
3 1/2 tbsp unsalted butter, softened
1 egg yolk
1/3 cup almond meal 1 tsp vanilla bean paste
3/4 cup runny honey, divided
2 pink lady apples, very thinly sliced 1 rosemary sprig, leaves picked
Directions
1. Preheat oven to 400 F. 2. Roll pastry to a 12-inch-diameter circle, 1/8 inch thick. Place on a tray lined with baking paper. 3. In a bowl, place butter, egg yolk, almond meal, vanilla, and 1/4 cup honey. Beat with a wooden spoon until smooth. 4. Spread over pastry and arrange apple slices on top. Drizzle with 1/4 cup honey. Bake for 20 minutes, until golden and crisp. 5. In a pan over low heat, place rosemary and remaining 1/4 cup honey. Swirl to melt honey. Pour over tart, and enjoy!
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