How charitable remainder trusts can help real estate investors reduce taxes and build wealth
When selling highly appreciated assets—especially real estate—investors often face substantial tax liabilities. In a recent interview, Joe LaFleur spoke with David Blain, CEO of Bluesky Wealth Advisors, about strategies to minimize taxes, generate lifetime income, and maximize charitable giving through charitable remainder trusts.
The tax challenge of selling appreciated assets
One of the biggest hurdles for real estate investors is the significant tax burden when selling properties. Capital gains tax, depreciation recapture, and state taxes can substantially reduce proceeds.
“If you’re selling an asset that has significantly appreciated over time, you could be looking at a huge tax hit,” Blain explained. “Depending on your state, federal capital gains taxes, depreciation recapture, and other taxes can take a big bite out of your proceeds.”
To avoid losing a large portion of their profits to taxes, investors need alternative strategies that provide financial benefits beyond a direct sale.
Related resource:
Why a capital gains tax increase means now is the time to sell
Charitable remainder trusts: A tax-efficient solution
One such strategy is the charitable remainder trusts—a tool that allows sellers to convert their real estate into a steady income stream while deferring taxes and supporting a charitable cause.
“A charitable remainder trusts allows you to sell your highly appreciated asset without immediately paying capital gains tax,” Blain stated. “Instead, the proceeds go into the trust, which then provides you with an income stream for life or a set term. At the end of the term, the remaining assets go to a charity of your choice.”
This approach benefits investors in multiple ways:
- Defers capital gains taxes to maximize reinvested funds.
- Generates an income stream tailored to personal financial goals.
- Provides an immediate charitable tax deduction for future giving.
Comparing charitable remainder trusts to a traditional sale
For those unfamiliar with charitable remainder trusts, Blain broke down how they compare to a traditional sale.
“Let’s say you sell a property outright for $5 million. After taxes, you might walk away with $3.5 million. But if you sell it through a charitable remainder trust, that entire $5 million gets reinvested, providing you with a larger income stream and a future charitable donation—all while significantly reducing your tax burden.”
Instead of paying taxes upfront, the money remains in the trust, compounding its benefits over time.
Learn more:
How to use cost segregation studies for tax savings on a new multifamily asset
Who should consider a charitable remainder trust?
While a charitable remainder trust isn’t for every investor, it can be a powerful tool for those looking to protect their wealth while planning for retirement or philanthropic giving.
“It’s a great solution for real estate investors who don’t necessarily need a large lump sum but want to maximize their wealth while giving back,” Blain noted.
Investors who might benefit from a charitable remainder trust include those who:
- Own highly appreciated real estate
- Wanting to defer capital gains taxes
- Looking for reliable, long-term income
- Have charitable intentions and want to leave a legacy
Planning for financial success
As the conversation wrapped up, Blain emphasized the importance of strategic planning.
“A lot of investors don’t realize the options available to them. Whether it’s a charitable remainder trust or another strategy, having a solid plan in place can make all the difference,” he concluded.
For real estate investors looking to optimize their financial future while minimizing taxes, charitable remainder trusts offer a compelling strategy that balances wealth preservation with charitable impact.
Watch the full interview:
Interview on Charitable Remainder Trusts
Looking for help in figuring out if it’s time to sell your multifamily property?
At 100Units, we aim to help you achieve your long-term investment goals. Our multifamily brokers will offer unique perspectives on your situation and provide real-time market analysis.
We offer our valued sellers:
- Marketing strategy
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We’ll also collect, study, evaluate, and share market data to help you make timely and informed decisions. From determining the listing price to conducting the closing, we’ll facilitate a smooth transaction for you every step of the way.