Charitable Remainder Trusts May Be An Option To Fund Long Term Care

For those planning to make the move to an assisted living community, the incidental costs of long-term care services are a major concern. While Medicare and health insurance help cover the costs for medical services, it typically does not cover long-term care.

Shari Motooka-Higa, Certified Senior Advisor said, “Coming to grips with the possibility of spending a majority of their savings on long-term care services, many senior homeowners may feel that selling off assets is their best choice. However, this usually results in substantial Capital Gains taxes, thus reducing the amount remaining to pay for these services.”

A Charitable Remainder Trust (CRT) is an irrevocable trust that generates an income stream for one or more individuals for their lives or a period of 20 years, with the remainder of the property going to charity of the donor’s choice.

Kay Mukaigawa, Principal Broker and President of Primary Properties, said, “The charity-giving strategy generates income to help pay for long-term care services while at the same time enabling you to fulfill your phil-anthropic wishes.”

Michelle Ogata, Attorney with Estate Planning Group, stated, “One benefit of using a Charitable Remainder Trust in long-term care planning is once the property is sold, Capital Gains taxes are deferred and in many instances, avoided. The CRT can then invest the total value and proceeds in order to provide a stream of income, which in turn can be used to pay for long-term care services. Another benefit is that if the property is a rental property, the senior no longer needs to be concerned with being a landlord, increases in maintenance fees, or other expenses related to homeownership.”

Key Benefits

• To preserve the value of a highly appreciated asset: A CRT allows you to contribute property to the trust at the full fair market value; when the property is sold, Capital Gains taxes may be avoided.

• Income tax deductions: A CRT may enable you to take a partial income tax deduction when you fund the trust. The deduction is based on a calculation on the remaining distribution to the charitable beneficiary. • Simply your life: The CRT’s investment income will provide you with a guaranteed income stream, without the responsibilities of homeownership.

The content of this article is not intended to be a substitute for professional advice. Always seek the professional advice of your certified accountant or estate attorney.

Please join Kay Mukaigawa, Shari Motooka-Higa, and Michelle Ogata for an informative session on 1031 Exchanges and Charitable Remainder Trusts at our upcoming seminar.