Lifepoint Financial Design – LifePoint Financial Services – Mike Metzger Financial Planning

The real estate market is hot and so is real estate equity appreciation. I’m going to give you a financial planning strategy that strives to reduce your taxes and increase your income on your highly appreciated real estate!

Real Estate is extremely valuable, which is exactly why the real estate values are skyrocketing right now! Pretty great news for homeowners!

Except when you want to sell and you forgot how huge the capital gains hit will be.

You may be selling for different reasons. If you are a real estate agent, you may just want to financially plan for a different season in your life. Maybe the property gains on your investment property are looking pretty, and your just plain sick of being a landlord. 

Why not cash in on a good investment. Everybody has heard the saying, “get out while you are ahead”. But, the second you heard what the tax bill looks like, you have second thoughts.

What if I told you there was a way to reduce what you pay to Uncle Sam on that tax bill, and receive more income than you did on your rental property, AND not have any of the headaches of being a landlord?!!

You would say, “tell me more!”…

Let’s say you invested in Salt Lake City, Utah back in 2000 before the Olympics arrived. You bought a 4 bedroom, 4 bathroom home up on the mountain overlooking the city for $200,000, hypothetically. Well, if you know Salt Lake City, and assuming it’s been updated over the years, that house is now worth $1 million. You’ve had a great run! But, all the tenant turnover and leaky faucets has put you over the edge. It’s just not fun anymore.

You want to get rid of the property, but you enjoyed the income. And you just don’t want to give Uncle Sam all that capital gains money.

Well, I’m about to give you a strategy that gives you the best of all worlds, PLUS 1.

Enter The Charitable Remainder Unitrust.

In the example above, there is $800,000 in capital gains. On an investment property, you do not get the marital tax exclusion, so all $800,000 is subject to capital gains tax.

What you would do is draft a Charitable Remainder Unitrust (CRT) with an attorney. Then you would transfer the property title into the name of the irrevocable Charitable Remainder Unitrust, so that now the trust is the owner of the property.


The next step is to sell the property. Again, AFTER you transfer title to the Unitrust.

Guess what?? Now, you have reduced your capital gains exposure!


In addition, your asset is not gone. It remains inside of your new CRT and you are allowed to take an income percentage against the value of the property every year. The minimum percentage that must be taken is usually 5%, but can be higher like in the example shown. But, the home gets revalued every year. So, the first year you receive $70,000 in income, but every year thereafter, it could potentially continue to increase!

This is likely much more income than the rental property was receiving being rented out. It also likely has a higher inflation adjustment than the previous rent!


After the completion of all income payments, the principal or corpus is distributed to

charity. Even though the charity might not receive anything for many years, the

government permits the trust grantor (the person who establishes the irrevocable trust)

to take an immediate income tax deduction.

The deduction is a percentage of the value of the property transferred to the trust and is calculated using the ages of the donors and the Unitrust percentage selected. Many trust donors use their current tax savings for additional investments. They are able to enjoy the appropriate return from their charitable trust payments and also benefit at the same time from substantial income tax savings.


And the final, and arguably most important benefit, is that after a period of time, the remaining principal is transferred to a charity that you care about. Just think about how much that asset can continue its life providing happiness to others. Most 501c(3)’s qualify, so that opens it up to one or more charities that you have a passion for.


This strategy is not necessarily for everyone, but as you can see, it has massive benefits. You have to be comfortable with irrevocably gifting away the rental property. In addition, this financial strategy really works best when you have a charitable passion, as the charity is ultimately the beneficiary of the property itself. 

All that being said, let’s recap:

  • Title the property into a CRT
  • Sell the property and reduce all capital gains
  • Receive a large income stream for a period of years
  • Get a huge charitable deduction in year 1
  • Do good knowing your charity will get a chunk of money


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. 

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

 Tracking # 1-05201580

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