Visit RenInc.com or call 800-843-0050 to write your own donor story!

Chris & Rachel TrumanCombining a Special Needs Trust with a Charitable Remainder Trust

This example is hypothetical and for educational use only. The situations, tax rates or return numbers do not represent any actual clients or investments. There is no assurance that the rates depicted can or will be achieved. Actual results will vary. Please consult with legal and tax counsel about the suitability.

QDCM ©RenPSG 2004-2017

$4,562,000

$2,967,000

$135,000

Before Tax Lifetime Cash Flow to SNT

Charity

Deferred Capital Gain Taxes

Benefits of Combining an SNT with a CRT Year 7 Before Tax Distribution to SNT $200,000

Assumptions:

STOCK

DEDUCTION

CHRIS &RACHEL

Chris and Rachel Truman, both age 65, have a son, Sam Truman age 40, who has Special Needs. Sam has medical and learning disabilities, but these are not expected to limit his life expectancy. Nevertheless, Sam will need constant attention and special rehabilitative equipment throughout his life.

Having already addressed their own Medicaid planning, Chris and Rachel want to ensure that Sam will be taken care of without endangering his ability to claim government benefits while still making some substantial charitable gifts to institutions that have lovingly cared for their son.

Chris and Rachel’s planning team recommends, among other documents, a Special Needs Trust (SNT) and a CharitableRemainder Trust (CRT). The CRT will make distributions to the SNT for the rest of Sam’s life based on Scenario #2 in Revenue Ruling 2002-20.

Working with Sam’s caregivers, Chris and Rachel’s planning team determines that Sam will need additional rehabilitationequipment in 7 years and will have other increased expenses starting in 25 years. As a result, they recommend a specially- drafted Flip-CRUT document along with a corresponding investment strategy that is designed to meet these goals.

Chris and Rachel transfer stock worth $1,000,000 to a Flip-CRUT designed to pay to the SNT the smaller of 7% or net realized income until Sam turns 65 and then pay a regular 7% amount to the SNT. Chris and Rachel claim an immediate $100,000 income tax deduction. The CRT sells the stock, which defers $135,000 in immediate capital gains taxes.

The SNT Trustee makes discretionary distributions during Sam’s life to improve his quality of life and ameliorate his disabilities.

QUARTERLY DISTRIBUTIONS

DISCRETIONARY DISTRIBUTIONSFOR

SAM’SBENEFIT

CRT PRINCIPAL AT DEATHCHARITIES

3RDPARTY SNTFOR SAM

LIFETIMECRT

FOR SAM

• Marginal Federal and state dividend and capital gain taxrates of 15%.

• Marginal Federal and state income tax rate of 35%.• 2% dividend yield and 5% capital appreciation annually.• Payout rate = 7%. CMFR=2.2%. Deduction may be limited.• Most CRTs that pay to a second trust must be limited to

a term of 20 years or less.• For further discussion of combining SNTs and CRTs, seeRevenue Ruling 2002-20.