Giving Away Your Cake (And Eating It, Too) AKA Charitable Remainder Trusts

When thinking about our own personal assets we have many choices. We can hold on to them (having our cake), swap them out (trading for a different cake), or sell them and buy a consumable asset (eating the cake).

One of the first recorded instances of the age-old phrase “a man cannot have his cake and eat it too” was written from Thomas Duke of Norfolk to Thomas Cromwell speaking about how the construction of Kenninghall had cut deeply into his finances. Today, we use this phrase when considering saving something of value or giving it up for consumption. When thinking about our own personal assets we have many choices. We can hold on to them (having our cake), swap them out (trading for a different cake), or sell them and buy a consumable asset (eating the cake).

With responsible planning for the future, the size of your portfolio should grow through the years. At the point of retirement for someone, a combination of pension, social security, and portfolio income may be able to provide for all their expenses. This is a fantastic place to be in as a retiree. A dependable cash flow can empower gifting to the extent that the cash flow remains intact.

For a retiree who has an excess income stream from investments, a Charitable Remainder Trust (CRT) can provide a certain and continued stream of income from donated property. As the name suggests, a charity will inherit the property held in the trust when the beneficiaries pass away, just as it would if you left the property to a charity in your will. However, the additional benefit of a CRT is the income tax deduction received for giving the property occurs immediately. As a beneficiary you retain an income interest.

Give thought to the idea of giving some of your cake away now. There are many great non-profits and charities that will thank you. Now, I know all this talk of cake has really gotten that sweet tooth going, so feel free to eat some cake now, too!

Cristy Freeman, AAMSSM
Operations Manager

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