‒ If the assets grow at 6% per year, at the end of the 10- year term, $1,462,990 would pass to the remainder bene ciaries free of additional gi /estate tax. 1 ‒ Alternatively, if the IRS discount rate were 1.2% at the time of the transfer, a $533,590 annuity would “zero out” the CLAT and $1,921,094 would pass to the remainder bene ciaries if the assets grew at the same 6%. 1
trust measured by a life (or lives) or a term of up to 20 years, and makes a tax-deductible gi of the trust remainder to charity. e trust itself is tax-exempt but distributions from the trust are taxable. 1 • A lower interest rate produces a smaller income tax charitable deduction (and increases the value of the annu- ity). 1 • Example: Donor, 60, transfers $1 million to a CRAT and retains a $60,000 annuity for a 10-year term when the IRS discount rate is 5.8%. e donor funds the trust with a low basis concentrated stock position that doesn’t pay dividends. e trust sells the stock without capital gains tax and reinvests in tax exempt municipal bonds, thereby limiting the taxable income to the donor on annual dis- tributions. e donor makes a charitable gi of $554,182. 5 ‒ If the discount rate declined to 3.4%, the charitable gi decreases to $498,478.5 ese examples demonstrate that wealth planning requires ongoing management to maintain relevance through evolving life events, personal preferences and eco- nomic factors. Knowing your options and impacts across a lifetime of economic seasons could provide rejuvenating bene ts to sow the seeds of growth for generations.
Exhibit B: Charitable Remainder Annuity Trust (CRAT) 4
rough a CRAT a donor irrevocably transfers proper- ty to a trust, retains an annuity interest (cash ow) in the
Kathleen Youngerman, Private Wealth Advisor e Harmony Family O ce at Morgan Stanley Private Wealth Management 314 889 4862 Valerie.L.Warren@morganstanleypwm.com
advisor.morganstanley.com/the-harmony-family-o ce 14805 N Outer Forty Rd / Ste 200 / Chester eld, MO 63017
Disclosures Private Wealth Advisor Kathleen Youngerman has engaged Mind Body Soul Magazine to feature this content . e information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its a liates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning, charitable giving, philanthropic planning and other legal matters. is material has been prepared for informational purposes only and is subject to change at any time without further notice. Information contained herein is based on data from multiple sources and Morgan Stanley Smith Barney LLC (“Morgan Stanley”) makes no representation as to the accuracy or completeness of data from sources outside of Morgan Stanley. It does not provide individually tailored investment advice. e appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Be aware that the particular legal, accounting and tax restrictions, margin requirements, commissions and transaction costs applicable to any given client may a ect the consequences described. is presentation was designed to illustrate the nancial impact of a particular planning decision. e slides herein do not constitute a recommendation.
Caution: many estate techniques share the common risk of the loss of control of the assets once the gi of the assets is complete. ese slides address federal tax issues only; states may have di erent tax exemption amounts and statutes that impact the analyses. Past performance is not necessarily indicative of future performance. We are not o ering to buy or sell any nancial instrument or inviting you to participate in any trading strategy. Morgan Stanley Smith Barney LLC does not accept appointments nor will it act as a trustee but it will provide access to trust services through an appropriate third party corporate trustee. Rates will vary over time, particularly for long term investments. Hypothetical results are for illustrative purposes only and are not intended to represent future performance of any particular investment. Your actual results may di er. e principal value and investment return of an investment will uctuate with changes in market conditions, may be worth more or less then original cost. Taxes may be due upon withdrawal. e term “Family O ce Resources” is being used as a term of art and not to imply that Morgan Stanley and/or its employees are acting as a family o ce pursuant to Investment Advisers Act of 1940. Morgan Stanley Private Wealth Management, a division of Morgan Stanley Smith Barney LLC. Member SIPC. CRC 5449864 2/23
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MindBodySoul.media | Spring 2023
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