The Client
A retired couple, age 69, with an estate of $ 2,000,000 --- composed of $ 1,000,000 of low basis stock (via the retired executive's former employer) and $ 1,000,000 of various other non-investment assets.
The Summary Overview
Although they enjoyed a comfortable standard of living, cash flow was "tight" for some of the luxuries they wanted. The $ 1,000,000 of stock paid an annual dividend of less than 1% --- but they were reluctant to sell because of large capital gains.
The Consideration
After consideration of several ideas, a Charitable Trust was proposed that gave the couple the income they desired (with a substantial "cushion") while avoiding capital gains taxes.
The Result
The couple elected to retain $ 500,000 of stock and to gift $ 500,000--- with provision for a wealth replacement trust that would make sure their heirs received as much or more than if the stock had been kept. The additional net after-tax cash flow over their actuarial lifetime was in excess of $ 600,000 and their estate will be able to make a gift in excess of $ 575,000 to their favorite charity.