Testamentary Trust

Ted and Alicia had often put some of their savings into the stock market. One of their first charitable gifts had been a gift of appreciated stock. They were also employed by companies that had 401k plans. They kept investing and the value of their plans kept growing.

Ted: "It really has been a wonderful ride. Our first experience was giving several hundred shares of a stock that had more than doubled in value. We needed some help that year with our tax situation and that gift was a great idea. Also, our tax-sheltered retirement plans kept growing and just recently we rolled them into our IRA. It's grown beyond our wildest dreams."

Alicia: "But taxes will eat up so much of it. Not that we need it all, but we were hoping to get more value out Ted and Aliciaof it."

Ted: "We found a way to do everything we wanted - have access to the principal if we need it and, when we're gone, provide income for our kids. And, this will provide a nice gift for those who need it. Our attorney told us about a testamentary charitable remainder trust funded with the assets that remain in our IRA after we're gone."

Alicia: "Tax benefits, protecting our family, and knowing we're making a difference in other peoples' lives - it feels good!"

A testamentary trust only becomes effective and irrevocable at the time of your death. For Ted and Alicia (individual circumstances will vary - as with all tax and estate planning, please consult your attorney or estate specialist), a beneficiary designation in their IRA will transfer the remaining assets at their death (second to die) into the testamentary charitable remainder trust.

The results are that the assets remaining in the IRA at their deaths will not incur any income tax liability going into the trust and a nice future gift is established for the charitable organization. In addition, a taxable income stream for their heirs is created and some estate taxes may be saved.

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