Cliff, Grand Tour, Remainder discussed on Legally Speaking with Attorney Mike Collins
Collins back with you on Legally speaking, and we're gonna go right back to the phones. We've got Cliff and Manassas has been patiently waiting. So, Cliff, Thanks for calling her when we tried to help you this morning. Well, good morning. I just have a quick question. I was reading up on article yesterday and I came across the term that I hadn't heard before. And as I looked into it, uh, I kept coming across additional terms that made me even more confusing. So the term was granted Retained Annuity trust. I just called a grad, which Got me into seeing something called a charitable, remainder trust and a charitable remainder unit trust and then charitable gift annuity. And then when it got me thinking was What is my normal? You know, Revokable trust that I have Is it sufficient and Juanito? You know, go back to the attorney, and, you know, ask these questions. Really? Just looking for it. Can you educate me and one what I was coming across. Yes. Oh, Cliff, you know grits, Gratz grunts and Critz Kratz crusts on duh, no charitable, lead trusts and charitable annuities. And, you know, islets and and all of these wonderful sort of buzzwords and acronyms, and I don't know initial ISMs and so forth. Yeah, honestly, Cliff, typically these arm or involved Maneuvers in the case of a grad, which is again a grand tour retained annuity trust. And it has a couple of brothers. The grit, which is the grand tour, retained income trust and the grunt, which is the grand Tour, retained retained unit trust. On their three siblings that behave very similarly. And the way it works is you you set up a trust where you contribute a pile of money into an annuity. And that annuity or that investment pays you back over the years. But then at your death, it goes to the beneficiaries that you name now, in the case of a grit, a graft or regret. Typically, the beneficiaries are going to be people. You know your kids or your nephew or your friend or whatever. They're the same mechanism works with Critz, Kratz and crusts. That's a charitable remainder annuity trust, a charity charitable, Remainder income trust in the charitable remainder unit. Trust those work the same way. But you put a pile of money in and it retains. And it gives you an income stream and then at your death, it goes to a charity, okay. So the difference between grits Gratz and Gretz in Chris Kratz and Kratz are that for the grand Tour retained versions. They go to people for the charitable remainder versions. They go to charity. Typically after you die, although, in theory you could set one up, saying, you know that just stops in some magic years, you said for the next 15 years I get this annuity and then within 15 years stops, it goes to the charity or it goes to the next people in line, but but typically, you'll say for my life, but it has to be some define noble term. And even though your life may not be defined, able, at least not by you, perhaps by God above The I. R. S who is slightly less high than God. But still above you has tables that determine. Okay. What? What? How long does Cliff probably live According to these actuarial tables that the I R s puts out and and by the way, A lot of these tables haven't been touched since the 1990 census. And so they get to be a little bit creepy if you start reading them, you know, I've only got you know, 17.6 years. But that is not factor in. You know, the people are living longer or you're you're smoking status or how many blueberries you eat through whatever you're into. So don't be too fearful of those. But Cliff. The basic point with these things, different maneuvers is it's a way of compressing the value of the amount that you're trying to give. To your beneficiaries. How does that happen? The answer is because they have to wait before they get the gift. And so if you were to give your son ah million dollars tomorrow, I just wrote him a check for a million bucks. You know, in presenting you have that money, and it clears. Then that becomes a taxable gift accounts against your gift tax. Or your lifetime transfer tax exemption and s. So you sort of take a hit for that one way or the other, But with the grad he doesn't get it right away. You say I'm going to retain the right to the income off of this million dollars until I die. And so he has to wait until you die before he gets the gift. And so what is the gift worth to him? This million dollars that becomes his someday after you die and you know, minus these annuity payments that have come out. And the answer is that the word worth a lot less than a million dollars because he has to wait for it for starters, and so it compresses the value of the gift. But it is an ear revokable trust can't change it and the term of years and regret. Sorry. You gotta gotta pick a term in years. You have to survive that term of years on, so it gets to be sort of interesting in terms of how you're doing it that way. So on by the way, a close cousin thing the queue part, which is the qualified personal residents trust you do the same thing with house where you say Okay, I'm gonna put my house into this trust. I reserve the right to live there, But after a certain term of years, it just goes to my son. It becomes my son's house. And so that compresses the value of the gift there. So it's It's a way of compressing the value of assets that you're trying to move to somebody in the case of a great grant Grete or Q pert in the case of a charitable remainder, trust you're trying to provide for a charity in a way that still allows you to have income while you're alive, So gives you some security, but it provides for the charity ultimately s. Oh, yeah. These tend to be advanced techniques. You can check in with your lawyer and see if they make sense for you. Typically, they don't start Making sense until you get well into a a taxable estate on a federal or state level. All right, we're going to go take a short break for the news will be right back at Triple 86 30 W. M A L Let's go to Heather and see that what's going on in the universe? W M E L F M WOODBRIDGE, Washington Now more than ever depend on one of 5.9 FM W M.