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Private Capital Markets: Valuation, Capitalization, and Transfer of Private Business Interests + Website, 2nd Edition by Robert T. Slee

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CHAPTER 29

Charitable Trusts

Charitable trusts enable business owners to transfer their businesses while enjoying the benefits of charitable giving. Since the business is the primary asset for most private owners, the disposition of this asset must be maximized. The use of a properly structured charitable trust enables owners to win an estate planning trifecta. First, the owner transfers all or part of the business while possibly eliminating capital gains on the sale. Second, the owner either earns ordinary income for life based on receiving some percentage of the sales proceeds or removes the asset from his or her estate. Finally, the owner's heirs and charity of choice benefit from implementing this technique. This chapter describes the two major charitable trust types, charitable remainder trusts (CRTs) and charitable lead trusts (CLTs), and discusses variations of these types.

Charitable trusts offer owners tremendous flexibility in planning the eventual transfer of a business interest. Incorporating charitable giving into an estate plan can be accomplished by a charitable trust. The transfer methods in this chapter rely on laws and supervision by the Internal Revenue Service (IRS). Since the U.S. government subsidizes business owners to use these trusts by reducing the donor's taxes, these rules must be followed to the letter. As with all areas that require detailed knowledge of the law and IRS codes, readers are encouraged to confer with experts before using any of the methods ...

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