You are here: Home FAQ FAQ Understanding Charitable Remainder Trusts 3. Why not sell the asset myself and re-invest?

3. Why not sell the asset myself and re-invest?

You could, but you would pay more in taxes and there would be less income for you. Let’s look at an example.

Years ago, Max and Jane Brody (ages 65 and 63) purchased some stock for $100,000. It is now worth $500,000. They would like to sell it and generate some retirement income.

If they sell the stock, they would have a gain of $400,000 (current value less cost) and would have to pay $60,000 in federal capital gains tax (15% of $400,000). That would leave them with $440,000.

If they re-invest and earn a 5% return, that would provide them with $22,000 in annual income. Multiplied by their life expectancy of 26 years, this would give them a total lifetime income (before taxes) of $572,000. Because they still own the assets, there is no protection from creditors and no charitable income tax deduction is available.

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