Charitable remainder trusts (CRTs) can be an effective means of managing your wealth and achieving your charitable giving goals. Let’s go over the basics of charitable remainder trusts and their potential benefits.

What is a charitable remainder trust, and how does it work?

A charitable remainder trust (CRT) is a type of irrevocable trust that allows donors to donate to charity while also receiving certain tax benefits. The grantor of a charitable remainder trust makes contributions to the trust in the form of property, cash, or other assets. Either the grantor themselves or another designated beneficiary then receives distributions from the trust for life or for a set period of time (no longer than 20 years). After that time, the remainder of the trust’s assets is donated to one or more charitable organizations of the grantor’s choosing—hence the name “charitable remainder trust.”

Types of CRTs

There are two main types of charitable remainder trusts:

1. Charitable Remainder Annuity Trust (CRAT): pays a fixed dollar amount each year and does not allow additional contributions.
2. Charitable Remainder Unitrust (CRUT): pays a fixed percentage based on the trust balance (which is revalued annually) and allows for ongoing contributions.

Benefits of Charitable Remainder Trusts

• Predictable income stream: A CRT provides a regular and reliable income stream to the non-charitable beneficiaries for the lifetime of the trust.
• Immediate partial income tax deduction: A CRT provides a partial income tax deduction to the donor in the year the trust is created and funded. The amount of the deduction is limited to the value of the remainder interest that will go to charity. This amount will vary based on factors such as the payout rate of the trust and the ages of the noncharitable beneficiaries. The deduction is also subject to AGI limits and other limitations under the tax code.
• Tax-free growth: Because the CRT is a tax-exempt entity, assets within the trust grow tax-free.
• Deferred capital gains tax: CRTs avoid immediate capital gains tax on the sale of assets transferred to the trust.
• Reduced estate taxes: Since a CRT is an irrevocable trust, the assets within the trust are removed from the grantor’s taxable estate, thereby reducing the grantor’s estate tax liability.
• Asset protection: The assets in a CRT are protected from creditors and lawsuits.

Other Things to Know

• Since a CRT is an irrevocable trust, the grantor relinquishes control of the trust’s assets to the trustee. Any assets that go into the trust cannot be returned.
• The annual annuity distributed from the trust must be at least 5%, but no more than 50%, of the initial fair market value of the trust’s assets.
• The portion donated to charity must be at least 10% of the initial value of the assets in the trust.
• Based on how the trust is structured, the grantor or other beneficiaries may receive income from the trust annually, semi-annually, quarterly, or monthly.
• Payments from a charitable remainder trust are taxable as income and must be reported to the IRS. CRTs must file Form 5227, Split-Interest Trust Information Return

Partner with RBT for Your Estate Planning

RBT’s Trust, Estate, and Gift team is here to help you establish and manage your charitable remainder trust. Our experienced professionals handle your trust’s accounting, tax compliance, and financial administration, so you can have the peace of mind that your assets are protected. Call us today and find out how we can be Remarkably Better Together.

The One Big Beautiful Bill Act (OBBBA) has introduced sweeping changes across the economic and legal landscape of our country, impacting individuals, families, and businesses in a range of ways. These changes will affect various aspects of financial planning—and estate planning is no exception. From revised estate and gift tax exemptions to expanded uses for 529 savings plans, the legislation includes provisions that could affect your family’s financial future. In this article, we break down the key changes introduced by the OBBBA that may impact your long-term estate planning strategy.

Federal Estate, Gift, and GST Exemption

Beginning in 2026, the OBBBA permanently increases the lifetime exemption amount for the federal estate, gift, and generation-skipping transfer (GST) tax to $15 million per person ($30 million for married couples), indexed annually for inflation. The OBBBA eliminates the previously scheduled sunset of the higher exemption threshold. Please note that the New York State estate tax exemption amount remains at $7.16 million per person.

Permanent Extension of TCJA Tax Rates

The OBBBA makes permanent the tax rates and brackets established by the Tax Cuts and Jobs Act (TCJA) of 2017.

Qualified Small Business Stock (QSBS)

For QSBS acquired after enactment of the OBBBA, the percentage of gain excluded from gross income will rise from 50% to 75% if the stock is held for four years. If held for five years or more, the exclusion percentage will increase to 100%.

Expansion of 529 Plans

The OBBBA expands permitted uses of funds in 529 education savings plans by broadening the definition of “qualified expenses.” Tax-exempt distributions from 529 savings plans now apply to additional expenses (beyond tuition) related to enrollment in private, public, or religious elementary or secondary schools, including books, materials, testing fees, tutoring costs, dual enrollment fees, and educational therapies. The OBBBA also increases the annual limit for 529 account distributions for K-12 expenses from $10,000 to $20,000. Additionally, the OBBBA allows 529 plan funds to be used for “qualified postsecondary credentialing expenses,” including tuition, fees, books, supplies, testing, equipment, and continuing education required for participation in recognized postsecondary credential programs.

Trump Accounts

The OBBBA establishes a “Trump account,” a new tax-deferred investment account for children who are U.S. citizens under the age of 18. Contributions to these accounts are capped at $5,000 a year (adjusted for inflation after 2027) and can be made by parents, relatives, employers, and other taxable entities, as well as non-profit and government entities. Accounts opened for children born between January 1, 2025, and December 31, 2028 will include a one-time $1,000 government contribution.

Charitable Contributions

For taxpayers who do not itemize, the OBBBA creates a charitable contribution deduction of up to $1,000 for single filers for certain charitable contributions ($2,000 for married couples filing jointly). For taxpayers who choose to itemize, the OBBBA establishes a 0.5% floor on the charitable contribution deduction. For corporations, the bill establishes a 1% floor for charitable deduction contributions. Deductions for corporate charitable contributions cannot exceed 10% of the corporation’s taxable income.

Estate Planning Outlook

All in all, the One Big Beautiful Bill Act protects and expands policies favorable for family wealth management and estate planning. RBT CPAs will continue to provide updated information to our clients as more detailed guidance on the OBBBA is issued. In the meantime, to find out how the recent tax law changes might impact your estate plan, we encourage you to reach out to our Trust, Estate & Gift team at RBT CPAs. As always, RBT CPAs is here to support all of your estate planning, accounting, tax, and advisory needs. Contact us today to find out how we can be Remarkably Better Together.

As many know, a succession plan is a critical component of any business owner’s long-term business and financial strategy. Succession plans help to ensure the continuation of your business even after you leave your role as owner. If your company has multiple owners, you may benefit from establishing a buy-sell agreement as a part of your overall succession plan. This article will discuss buy-sell agreements along with other possible options for succession planning.

Buy-Sell Agreements

An important question that you will face when developing a succession plan is how ownership of the business will be transferred when the time comes for you to leave your role as owner. One option for transferring ownership is through a buy-sell agreement. Buy-sell agreements are typically implemented by companies with multiple owners to guarantee business continuity in the event that one owner leaves the business for reasons such as retirement, voluntary exit, disability, or death. Buy-sell agreements help to protect the business by allowing a smooth transition of ownership, preventing owners from selling interests to outside parties, providing a method for assessing the value of company interests, and avoiding certain tax consequences of transferring ownership.

There are two main types of buy-sell agreements: cross-purchase agreements and entity-purchase (redemption) agreements. Under a cross-purchase agreement, the interests of the departing owner are purchased by the remaining owners. In the event of an owner’s death, tax-free life insurance policies (taken out by all owners on each other) are often used to fund this purchase. Under an entity-purchase agreement, the business entity itself purchases the interests of the departing owner, also commonly using tax-free life insurance benefits to fund the purchase. The establishment of buy-sell agreements is merely one component of a comprehensive business succession plan.

Other Options for Succession Planning

Besides buy-sell agreements, other methods of transferring ownership include gifting or selling your business to a family member, selling to management, transferring ownership to your employees, selling to an outside party, or closing the business. Each of these options comes with its own implications, which is why it is important to consult with a knowledgeable advisor when deciding which succession options work best for your unique needs. RBT CPAs’ professionals in our Trust, Estate, and Gift Practice can help you create and update a succession plan that gives you peace of mind in knowing that you, your loved ones, and your business will be taken care of according to your wishes.

RBT’s experts can help you form a succession plan, refer you to an attorney who can draw up the necessary legal documents (or work with your attorney if you already have one), and review legal documents to ensure they accurately reflect your wishes. We are also available to review and update your plan annually to ensure it continues to reflect your wishes and is adapted due to any tax law changes.

If you are interested in learning more, getting started on a succession plan, or reviewing plans you already have in place, please don’t hesitate to give RBT CPAs a call to find out how we can be Remarkably Better Together.

If you turned 73 in 2024 and are the owner of a retirement account, you will likely need to make a minimum withdrawal by April 1 to avoid penalties.

What is an RMD?

A required minimum distribution (RMD) is the minimum amount that must be withdrawn annually from certain retirement plans beginning when the account holder turns 73.

Retirement plans to which RMD rules apply:

• All employer-sponsored retirement plans including profit-sharing plans, 401(k) plans, 403(b) plans, and 457(b) plans
• IRA-based plans such as traditional IRAs, Simplified Employee Pension (SEP) IRAs, and SIMPLE IRAs
• Inherited Roth IRAs and Designated Roth accounts after the death of the account holder

When are you required to start taking RMDs?

Owners of IRA-based plans must begin taking RMDs for the year they turn 73, even if they are not yet retired.

Account holders who turned 73 during the year 2024 must take their first RMD by April 1, 2025, and the second RMD by December 31, 2025.

RMDs can be delayed until retirement for holders of workplace retirement plans, unless the account holder is a 5% owner of the business sponsoring the plan.

What happens if required individuals fail to take an RMD?

If a person required to take an RMD fails to withdraw the full amount within the designated time period, that person may be subject to a 25% excise tax on the amount of the RMD. If corrective actions are taken within two years, that amount may be reduced to 10%. The penalty may be waived if the individual can prove the failure to take an RMD was due to “reasonable error” and that the proper corrective steps are being taken.

How are RMDs calculated?

The amount of the RMD is calculated using the balance of the retirement account on December 31 of the previous year divided by a life expectancy factor. The IRS tables listing life expectancy factors for different ages can be found on the IRS website. Most individuals will use the “Uniform Lifetime Table” to calculate their RMD.

Example: A 73-year-old individual has 100,000 in their retirement account (as of December 31, 2023, the previous year). Based on the Uniform Lifetime Table, the life expectancy factor for an individual who is 73 years old is 26.5. To calculate the RMD, you must divide 100,000 by 26.5. The RMD for this person would be $3,773.58.

Can you withdraw more than the RMD amount annually?

Yes, you can withdraw more than the minimum distribution amount.

Are RMDs taxable?

Yes, RMDs are subject to income taxes when they are withdrawn since contributions to the retirement accounts are made with pre-tax dollars. However, in New York State, the first $20,000 of retirement income for those 59.5 or older is tax-exempt. Spouses are eligible for this exclusion as well.

Need more information?

More answers to common RMD-related questions can be found on the IRS’s Retirement Plan and IRA Required Minimum Distributions FAQ page.

To avoid potential penalties, it is advisable to work with an accountant knowledgeable about RMD requirements, deadlines, and calculations. RBT CPAs’ accounting experts are here to guide you through the process of taking the required minimum distributions when the time comes. Give us a call today to find out how RBT CPAs can be of service to you.

One of the primary considerations when developing an estate plan is the taxes that will be due upon a person’s passing. With this knowledge, an estate plan can – and should – proactively include actions to help ensure more of a decedent’s assets go to the people and causes they care about, rather than taxes. This is even more critical when a family business is involved.

Following a person’s passing where there is no surviving spouse but there is an estate, taxes may be due. The most common type of taxes due are on income earned up to the date of death. For example, if a person passes on June 15, 2026, a final tax filing must be made by the following April 15 for any earnings between January 1, 2026 and June 15, 2026.  The executor is responsible for making sure individual income tax returns are prepared and filed, and related taxes are paid.

Income taxes due come from assets remaining in an estate before any distributions are made. Any individual income tax refund owed to the decedent gets added to the estate and distributed with other assets.

Federal and state estate taxes may also be due. Federal estate taxes are due when an estate, including prior taxable gifts, is valued at more than $13,610,000 (this is scheduled to decrease to an estimated $7 million starting January 1, 2026). Estate values above this exemption amount are taxed at 40%.

New York estate taxes are due if an estate is valued at 100% or higher than the state’s exemption amount ($6,940,000 in 2024). For purposes of calculating the estate value, any gifts made within three years of death are clawed back and considered part of the estate. If an estate is valued at:

• More than 105% of the exemption amount (more than $7,287,000 in 2024), state taxes are due on the entire value of the estate – not just amounts above the exemption.
• 100% to 105% of the exemption amount, the exemption phases out and an additional portion of an estate is taxed based on a sliding scale, with the top rate being 16%.

An estate plan should address who bears the burden of estate taxes. If a person’s will or revocable trust is silent on this matter, the person who receives an asset is responsible for paying estate taxes on that asset. If a will states estate taxes are to be paid out of the residuary of the estate, then the estate pays the taxes and distributes any remaining assets.

It’s important to remember that certain assets pass onto a named beneficiary and bypass a will. Two examples are life insurance and individual retirement accounts. In this case, the will or revocable trust should specify how taxes will be paid for these assets.

A third type of tax to consider is the tax due on the income earned on estate assets, such as interest earned on an estate bank account; dividends and interest on an estate brokerage account; and a 401(k), 403(b), or traditional IRA distribution.

In addition, when an individual passes away, their assets are revalued, generally as of their date of death.  If an estate sells assets, the selling price reduced by the date-of-death value generates a gain or a loss. If there is a gain, taxes are due. The federal and state governments want their tax revenues. If no distributions are made, the income taxes become the responsibility of the estate. If distributions are made, the income tax burden may end up being passed to the beneficiary.

If the decedent owned a business, it gets more complicated (which is why every business owner should have an estate and succession plan) and is governed by varying rules depending on whether the decedent operated as a sole proprietor, a partnership, an S-Corporation, or a C-Corporation.

For example, if the decedent owned a sole proprietorship, it may stop operating on the date of death and its assets and debts become part of the estate. For a partnership, an agreement usually spells out whether other partners can buyout the decedent’s share or whether the decedent may leave their partnership interest to beneficiaries. In either case, the partnership is an asset of the estate and needs to be valued.

S-Corporations and C-Corporations are similar to partnerships in that they are considered estate assets that must be appraised. If there are other shareholders of the business, there should be an agreement that details how shares of stock may be handled – whether sold to other shareholders, sold to outsiders, or distributed to beneficiaries.

As mentioned above, a family business is also considered an asset that must be valued for estate tax purposes. If the value of the decedent’s estate exceeds Federal and state estate tax exemptions, taxes will be due. Careful planning is needed to determine how these taxes will be funded. Frequently life insurance, owned by an irrevocable life insurance trust, is used to fund the estate taxes.

I have only provided highlights in this article. There are numerous different scenarios that play out based on each individual situation. Two key thoughts I would like to leave you with:

• You need a will or, even better, an estate plan that clearly defines your wishes and beneficiaries; otherwise, what happens to your estate may be decided by state law.
• When creating or updating your estate plan, be sure to account for tax liabilities following your passing to ensure your legacy remains intact.

If you have any questions about estate taxes or you would like to get started creating or updating your estate plan, RBT CPA trust, estate and tax professionals are available to help. To get started, email mtorchia@rbtcpas.com or call 845-567-9000 and ask for Michael Torchia. We would consider it a privilege to show you how we can be Remarkably Better Together.

Some sources say anyone with assets needs an estate plan, while others indicate it only delivers value to the wealthy. The truth is it’s not that simple and depends on each individual’s unique situation, as well as tax laws and legal processes in the state where you reside.

To start the discussion, it’s important to clarify the difference between a will and an estate plan. A will defines how certain financial affairs will be handled upon your death. An estate plan defines how your financial affairs, healthcare decisions, and legal concerns will be handled while you are alive and after your passing. Put simply: a will is one part of an estate plan.

While net worth is one factor that prompts the need for an estate plan, there are others like whether you have a business; a succession plan; a family; a blended family; young children; a dependent with special needs; others dependent on you for care and/or support (i.e., parents or siblings); a health condition that may require long-term nursing or in-home care (or you want protection just in case); concerns about family infighting or external challenges to your will; concerns about an heir’s ability to manage money; philanthropic goals; and more.

In essence, a comprehensive estate plan can help you understand the risks and opportunities related to your unique situation and plan accordingly. The goal is to help ensure your wishes – in life and upon death – are carried out so the people and causes you care about are taken care of in the manner you desire, and tax exposure is minimized.

Consider it an investment in your peace of mind. Documentation and guidance will be in place so, when the time comes, those who will be taking care of your affairs will have a clear roadmap to carry out your wishes.

So, what does estate planning entail? At RBT CPAs, our Trust, Estate & Gift professionals take the time to learn your goals and wishes based on your unique situation. We help you understand your options and their implications. We can point you to legal resources to draw up required documents and we review those documents to ensure they accurately reflect and align with your wishes while keeping an eye on the tax consequences.

It can take several months to complete an estate plan, execute related documents, and complete corresponding actions.  The time and resources you invest in a plan now can save time, money, and distress later.

If you do not have a will, state laws dictate what happens to your assets. Even if you have a will, upon your passing, your estate will go through probate – a legal process for settling an estate – prior to assets being distributed to beneficiaries.

Probate usually takes anywhere from 1 to 2 years to file the initial petition, gather assets, pay taxes and debts, pay administrative costs, finalize matters with the court, and distribute the estate balance. Contentious estates may take considerably longer to settle.  With certain estate planning moves, probate may be avoided altogether.

Once you have an estate plan, it’s a good idea to review it annually to ensure it reflects any changes in your situation and tax laws. (If you decide a will alone will suffice for your situation, we still encourage you to review it annually.)

To learn more about RBT CPAs estate planning services or to schedule a consultation, email irahilly@rbtcpas.com or call 845-567-9000 and ask for Ita. You’ll see why you and RBT CPAs can be Remarkably Better Together. RBT CPAs is also available to handle your accounting, tax, audit, and business advisory needs. Give us a call today.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.