How to Use Charitable Trusts for Sale Proceeds
Ron McCoy shares strategic insights on using charitable trusts to minimize taxes and maximize philanthropic impact following a business sale.
For business owners and high-net-worth individuals, a liquidity event such as the sale of a business presents both a tremendous opportunity and a significant tax challenge. One of the most effective strategies to manage the tax impact while aligning with philanthropic goals is utilizing charitable trusts. Ron McCoy recommends charitable trusts as a smart, tax-advantaged way to achieve both financial security and social impact.
Why Charitable Trusts Matter Post-Sale
When structured correctly, charitable trusts can significantly reduce capital gains taxes, provide income streams, and support meaningful causes. Business owners who engage in proactive planning can turn a liquidity event into a long-lasting legacy, ensuring their wealth works for both their family and the greater good.
Real-World Example: Blending Philanthropy and Tax Efficiency
A tech entrepreneur sold his company for $20 million and allocated $5 million to a Charitable Remainder Trust (CRT). This move deferred capital gains taxes, provided annual income distributions, and eventually funded several scholarships through his alma mater. His strategy minimized taxes while achieving a personal philanthropic mission.
Source: Fidelity Charitable – Benefits of CRTs
Key Advantages of Charitable Trusts
Ron McCoy emphasizes these primary benefits when using charitable trusts for sale proceeds:
1. Capital Gains Deferral
A CRT allows sellers to donate highly appreciated assets, sell them within the trust, and defer capital gains tax while receiving income for a set period.
2. Income Stream Creation
The trust distributes regular payments (annually or quarterly), offering a reliable income source, often for life or a term of years.
3. Philanthropic Legacy
At the end of the trust’s term, the remaining assets pass to the designated charities, supporting long-term impact and legacy building.
Case Study: Leveraging a CRT for Maximum Impact
Ron guided a business owner who sold her boutique firm for $8 million. She contributed $2 million of the proceeds into a CRT, securing tax advantages and setting up a lifetime income stream. After 20 years, the trust’s remainder funded a local community development initiative, fulfilling both financial and philanthropic goals.
Actionable Tips for Using Charitable Trusts
Ron recommends:
- Define Your Goals: Identify both your financial and philanthropic objectives early in the planning process.
- Select the Right Trust: Decide between a Charitable Remainder Trust (CRT) and Charitable Lead Trust (CLT) based on your income and legacy priorities.
- Coordinate with Advisors: Work closely with legal, tax, and investment professionals to ensure compliance and optimal structuring.
Ron McCoy’s Expert Approach
Ron combines conservative financial planning with forward-thinking strategies, helping clients use charitable trusts to maximize tax efficiency while supporting causes they care about. His expertise ensures every aspect of the transaction is aligned with personal values and long-term wealth goals.
