Hotel & Motel Management - November 17, 2008 - (Page 12) 12 Family Business IN THE details CRTs have benefits Current tax deduction Increase available income Avoid capital gains tax H&MM November 17, 2008 | HotelMotel.com www.HotelMotel.com/digital_edition Charitable trusts good for present, future I By Mike Henning H&MM Columnist f you are charitably inclined, the charitable remainder trust might be the tool for you. A CRT is an irrevocable trust designed to pay income to its creator, or others named by its creator, for life or for a period of years. At the death of the last surviving income beneficiary, the assets remaining in the trust pass to charities designated by the donor. The trust is exempt from income tax unless it earns unrelated business taxable income. Thus, the trustee can sell appreciated assets and not pay capital gains tax on the sale. The donor will receive income from an asset base equal to the full value of the original contribution. At the time the trust is created, the donor elects the amount of income to receive from the trust (between 5 and 50 percent). In the year the trust is funded, the donor generally receives a charitable income tax deduction equal to a portion of the contribution. The deduction must be at least 10 percent of the fair market value of the property added to the trust and may be much higher. CIRCLE NO. 116 For example, Susan, age 62, owns $1 million of highly appreciated stock in the family’s hotel business. She would like to sell the stock but hasn’t because of the capital gains tax she would have to pay, so she contributes the stock to a CRT. The trustee of the CRT will sell the stock tax-free and reinvest the proceeds in a diversified portfolio. She elects to receive an income equal to 6 percent of the assets in the trust annually. Her initial annual income will be $60,000. Her charitable income tax deduction will be about $360,000. She will receive income until death. Her income will go up in the second year if the total return of the trust assets exceeds 6 percent. At Susan’s death, the assets remaining in the trust will pass to her favorite charitable organization. The income tax deduction is based on the fixed percent of income the donor elects, the length of time the charity must wait to receive the distribution of the remainder interest, the distribution frequency, the current interest rate and other factors. The donor can use this deduction for contributions of cash up to an amount equal to 50 percent of the donor’s adjusted gross income. The CRT itself is exempt from paying any tax as long as it does not earn too much “unrelated business taxable income.” Donors wishing to provide for heirs can establish a companion strategy often referred to as a Wealth Replacement Trust, where they make annual gifts of a portion of the CRT distribution to another irrevocable trust outside the client’s estate. These funds can accumulate free of income and estate tax and provide a benefit to the heirs equal to or greater than what they might have otherwise received had the client simply sold the assets and invested the aftertax proceeds in the estate. hmm@questex.com Mike Henning is the founder of the Henning Family Business Center, which was established in 1985 and is headquartered in Effingham, Ill. He can be reached at hfbc@mikehenning. com and www.mikehenning.com. http://www.HotelMotel.com http://www.HotelMotel.com/digital_edition http://www.hmrsss.com http://www.hmrsss.com http://www.mikehenning.com
Table of Contents Feed for the Digital Edition of Hotel & Motel Management - November 17, 2008 Hotel & Motel Management - November 17, 2008 Contents Muted Mood at First HHOA Conference Concord Steps Up Management Plans, Goals DePaul Launches Hospitality School Perspective Legal FAQ Consultant’s Corner Maintenance Doctor Family Business Management Trends What Women Want Training Trends Marketing Matters HotelWorld Update Trends and Stats Top Design Firms Property-management Systems Transportation Services Laundry Equipment Marketplace Ad/Editorial Index Classifieds Checking Out Hotel & Motel Management - November 17, 2008 Hotel & Motel Management - November 17, 2008 - Hotel & Motel Management - November 17, 2008 (Page 1) Hotel & Motel Management - November 17, 2008 - Hotel & Motel Management - November 17, 2008 (Page 2) Hotel & Motel Management - November 17, 2008 - Contents (Page 3) Hotel & Motel Management - November 17, 2008 - DePaul Launches Hospitality School (Page 4) Hotel & Motel Management - November 17, 2008 - DePaul Launches Hospitality School (Page 5) Hotel & Motel Management - November 17, 2008 - Perspective (Page 6) Hotel & Motel Management - November 17, 2008 - Perspective (Page 7) Hotel & Motel Management - November 17, 2008 - Consultant’s Corner (Page 8) Hotel & Motel Management - November 17, 2008 - Consultant’s Corner (Page 9) Hotel & Motel Management - November 17, 2008 - Maintenance Doctor (Page 10) Hotel & Motel Management - November 17, 2008 - Maintenance Doctor (Page 11) Hotel & Motel Management - November 17, 2008 - Family Business (Page 12) Hotel & Motel Management - November 17, 2008 - Family Business (Page 13) Hotel & Motel Management - November 17, 2008 - Management Trends (Page 14) Hotel & Motel Management - November 17, 2008 - Management Trends (Page 15) Hotel & Motel Management - November 17, 2008 - What Women Want (Page 16) Hotel & Motel Management - November 17, 2008 - What Women Want (Page 17) Hotel & Motel Management - November 17, 2008 - Training Trends (Page 18) Hotel & Motel Management - November 17, 2008 - Training Trends (Page 19) Hotel & Motel Management - November 17, 2008 - Marketing Matters (Page 20) Hotel & Motel Management - November 17, 2008 - HotelWorld Update (Page 21) Hotel & Motel Management - November 17, 2008 - Trends and Stats (Page 22) Hotel & Motel Management - November 17, 2008 - Trends and Stats (Page 23) Hotel & Motel Management - November 17, 2008 - Top Design Firms (Page 24) Hotel & Motel Management - November 17, 2008 - Top Design Firms (Page 25) Hotel & Motel Management - November 17, 2008 - Top Design Firms (Page 26) Hotel & Motel Management - November 17, 2008 - Top Design Firms (Page 27) Hotel & Motel Management - November 17, 2008 - Top Design Firms (Page 28) Hotel & Motel Management - November 17, 2008 - Top Design Firms (Page 29) Hotel & Motel Management - November 17, 2008 - Property-management Systems (Page 30) Hotel & Motel Management - November 17, 2008 - Property-management Systems (Page 31) Hotel & Motel Management - November 17, 2008 - Property-management Systems (Page 32) Hotel & Motel Management - November 17, 2008 - Transportation Services (Page 33) Hotel & Motel Management - November 17, 2008 - Transportation Services (Page 34) Hotel & Motel Management - November 17, 2008 - Transportation Services (Page 35) Hotel & Motel Management - November 17, 2008 - Transportation Services (Page 36) Hotel & Motel Management - November 17, 2008 - Transportation Services (Page 37) Hotel & Motel Management - November 17, 2008 - Laundry Equipment (Page 38) Hotel & Motel Management - November 17, 2008 - Marketplace (Page 39) Hotel & Motel Management - November 17, 2008 - Ad/Editorial Index (Page 40) Hotel & Motel Management - November 17, 2008 - Classifieds (Page 41) Hotel & Motel Management - November 17, 2008 - Classifieds (Page 42) Hotel & Motel Management - November 17, 2008 - Classifieds (Page 43) Hotel & Motel Management - November 17, 2008 - Classifieds (Page 44) Hotel & Motel Management - November 17, 2008 - Classifieds (Page 45) Hotel & Motel Management - November 17, 2008 - Checking Out (Page 46) Hotel & Motel Management - November 17, 2008 - Checking Out (Page 47) Hotel & Motel Management - November 17, 2008 - Checking Out (Page 48)
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