The Retirement Trust
When Sandra was a child, the farm was out in the country. Now that the city has grown, the farm is within the city limits. Several developers would like to build homes on the farmland.
Sandra: We've received modest payments from the farm over the years, including from a neighboring farmer who rented our land for grazing. The value of the property has increased a lot since I inherited it.
Bill: The real estate market has been great in recent years. We wanted to sell the land and invest the proceeds for 10 years until we retire. But our financial advisor told us if we sold the farm, we would incur a large capital gains tax bill.
Sandra: A better solution was to transfer the land into a charitable remainder trust or a retirement trust. The trust could then sell the farm tax-free and invest the proceeds that would grow tax-free until we retire. By the time we retire, the payouts would be taxable, but we could have as much as $900,000 in the trust.
Their retirement trust pays either a fixed percentage of the trust assets each year or the trust income, whichever is lower. Because the trust is invested for growth instead of income, the payments from the trust will remain low while Sandra and Bill are still working. This strategy allows the trust to grow in value and provide greater income to Sandra and Bill in retirement.Bill: The real estate market has been great in recent years. We wanted to sell the land and invest the proceeds for 10 years until we retire. But our financial advisor told us if we sold the farm, we would incur a large capital gains tax bill.
Sandra: A better solution was to transfer the land into a charitable remainder trust or a retirement trust. The trust could then sell the farm tax-free and invest the proceeds that would grow tax-free until we retire. By the time we retire, the payouts would be taxable, but we could have as much as $900,000 in the trust.
Bill:We are planning to use our IRA for retirement. We will be able to travel and really enjoy our retirement with the extra income this trust will provide.
Is a retirement trust right for you?
If you have a highly appreciated asset, such as real estate or stock, and are several years away from retirement, a retirement trust could help you sell the asset tax-free while saving for retirement. Please contact us if you have questions about a retirement trust.
Your trust benefits may be different. Click here to view an example of your benefits.