What if there were a way to sell your highly appreciated assets—like a business, real estate, or stocks—without paying any capital gains tax, while also receiving a steady stream of income for the rest of your life, slashing your income tax bill today, and creating a meaningful legacy your children can continue after you’re gone?
That’s exactly what a powerful, little-known strategy can do for you.
Known as the Charitable Remainder Trust (CRT), this strategy is more than just a tax tool—it’s a comprehensive financial solution. It provides income, tax relief, and estate planning benefits all in one elegant package.
The CRT can transform a daunting tax bill into a lifetime income stream, reduce millions from your taxable estate, and set your family up to give generously for generations—while your heirs receive a tax-free inheritance through a clever insurance play.
In this article, Edward Papier, CIMA®, Certified Financial Fiduciary®, guides investors through how a CRT works, which assets qualify, and why this approach might be relevant —whether someone is looking to sell a business, optimize retirement income, or build a long-term family legacy.
Discover how to establish a family foundation and a method to unlock even more tax deductions each year, potentially up to 90% of an investment.
For investors who are planning a major asset sale or want to maximize income and minimize taxes, this is a strategy well worth learning more about.
About the Author
Edward Papier is the CEO and Founder of Amadeus Wealth Alternatives and a trusted authority in advanced wealth planning strategies.
A Certified Investment Management Analyst (CIMA®) and Certified Financial Fiduciary®, Mr. Papier brings decades of experience advising high-net-worth individuals, family offices, and charitable organizations.
He has served as Managing Director of a Boston-based advisory firm’s New York office and led the investment division of a regional New Jersey accounting firm.
His insights have been featured in publications such as The CPA Journal, Physician’s Money Digest, and WealthManagement.com, and he has lectured for both the New York and New Jersey State CPA Societies.
With a B.A. from Wesleyan University and an M.B.A. from NYU, Ed holds additional credentials in fiduciary studies and alternative investments, including the Certified Merger & Acquisition Advisor (CM&AA) designation. Outside the office, he’s a passionate classical pianist—hosting an annual recital in New York each May.
Now, let’s dive into one of Edward Papier’s most powerful planning tools—an elegant method to help you sell appreciated assets tax-free, generate income for life, and leave a meaningful legacy.
Edward Papier on Tax-Free Sales, Income for Life, and a Legacy That Lasts
Charitable Remainder Trusts (CRTs) are a tax-advantaged planning vehicle available for investors with appreciated assets, including securities, businesses, and real estate (with no mortgage), who are contemplating the sale of these assets.
Using a CRT provides a significant current income tax deduction, the ability to sell the asset with no capital gains tax, lifetime income, a future gift to charities, or the creation of a family foundation, and ultimately, a reduction in taxable revenue for the government.
How It Works:
1. Establishing the CRT: The trust is set up to hold appreciated assets. Once in the trust, these assets can be sold without incurring capital gains tax since the trust is tax-exempt. For business sales, the transfer to the trust must occur before signing a Letter of Intent (LOI) for the sale of the business.
2. Reinvesting the Proceeds: The proceeds from the sale must be reinvested, and investors are required to take income at a rate they determine, typically between 7% and 10%. For example, if $10 million has been placed in the trust and an 8% rate was set, they’d receive $800,000 per year. This income is taxable as ordinary income and can be kept for the remainder of the joint lives of a couple.
3. Charitable Remainder: At the second death, the remaining principal must go to either a public charity or a family foundation. Creating a family foundation allows the children to make charitable gifts in perpetuity, as the foundation is required to distribute 5% of its assets annually to public charities.
Some planners combine the trust with an insurance trust to replace the future gift to charity with an equivalent amount received tax-free by the children, effectively removing the $10 million from the taxable estate.
4. Tax Deductions: The current tax deduction is based on the present value of the future gift to charity. This value is calculated using the current government Applicable Percentage Rate (APR) and the amount of income you retain each year. A lower retention rate results in a higher future gift to charity and, therefore, a higher current tax deduction.
The amount of the charitable deduction you can take is limited, depending on the type of organization, the kind of property contributed, and the value of the donated property. Generally, remainder interests of cash left to public charities allow for deductions up to 50% of Adjusted Gross Income (AGI). You can use any unused deduction for up to five years if the allowable deduction is greater than the AGI limitation.
5. Insurance Solution: Some individuals might be concerned about leaving a large sum to a foundation or charity. This can be addressed by purchasing a “Second to Die” insurance policy, also known as a “Survivorship Life” policy. These policies are underwritten on a couple jointly and pay the insurance death benefit at the second death of the couple. They cost considerably less than policies underwritten on single individuals because a joint life mortality table is used.
Some of the income from the CRT can be used to pay the insurance premium, with remaining amounts still available for retirement income.
The insurance proceeds received by the children are free of tax when the policy is owned by a third party, often an insurance trust, with the children or third parties as trustees.
With this planning, the insurance proceeds are excluded from inheritance tax.
6. Additional Tax Benefits: Some investors will use a portion of the retained income to purchase an interest in an oil and gas limited partnership since 80%-90% of the amount invested is an “above the line” tax deduction, deductible against the income received from the CRT. Many investors fund these annually since the sponsors generate a new vintage every year.
A caveat here is investors must participate as an investing general partner in order to make use of the tax deduction.
Summary:
By transferring $10 million of appreciated securities to a CRT and then selling them, an investor can avoid capital gains tax. A current income tax deduction is available as well as greater retirement income than would otherwise have been available if investing the after-tax proceeds of the asset sale.
A family foundation can be established as the remainder beneficiary, which children can administer as trustees, and they also receive $10 million tax-free from the insurance proceeds. The $10 million and any growth related thereto is eliminated from the estate tax.
Important Considerations:
An important part of this planning is to ensure that the investments generating income purchased by the CRT do not have Unrelated Business Taxable Income (UBTI), as such investments will jeopardize the tax-exempt status of the CRT.
REITs do not generate UBTI, and private REITs, as opposed to publicly traded REITs (which are correlated with the stock market and therefore subject to valuation declines when the market loses value), are ideal for CRT investments.
Ready to Explore a Strategy Designed Just for You?
A Charitable Remainder Trust (CRT) is just one of the many advanced tools Edward Papier employs to help clients reduce taxes, increase income, and build lasting legacies. This strategy is incredibly powerful, but like all wealth planning techniques, its success hinges on how well it aligns with your unique financial situation.
Whether you’re planning to sell a business, optimize retirement income, minimize estate taxes, or create a long-term philanthropic legacy, Edward works closely with each client to tailor a custom approach using the most effective combination of strategies available.
To discover what’s possible in your specific case and explore how tools like the CRT can work for you, reach out for a personalized consultation.
To learn more or schedule a consultation, contact Edward Papier directly at ep@amadeuswealth.com, or call (212) 697-3930.
Disclosures
Amadeus Wealth Alternatives, Inc. (“Amadeus”) is an investment adviser registered in the states of New York and New Jersey. Registration does not imply a certain level of skill or training.
The content provided herein is intended as an information source for investors capable of making their own investment decisions. However, this information is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. It remains the reader’s exclusive responsibility to review and evaluate the content of this article and to determine whether to accept or reject the content. Amadeus expresses no opinion as to whether any of the content of this article is appropriate for a reader’s investment portfolio, strategy, financial situation, or investment objective. Readers do not receive investment advisory, investment supervisory or investment management services, nor the initial or ongoing review or monitoring of the reader’s individual investment portfolio or individual particular needs.
Therefore, no reader should assume that this article is a substitute for individual personalized advice from an investment professional of the reader’s choosing. Rather, this article is designed solely to provide readers with a method to evaluate certain investment-related information.
Please see our written disclosure brochure for information about Amadeus’ investment advisory services and fees, the risks associated with investing, and other important disclosures. For information on becoming an Amadeus client, please contact Edward Papier, President of Amadeus, at ep@amadeuswealth.com or 212-697-3930.