How a Charitable Remainder Trust Can Help Diversify a $2.4 Million Concentrated Stock Position While Avoiding Capital Gains Tax

Summary

A 68-year-old retired executive with $2.4 million in a single concentrated stock position (cost basis of $180,000) faces a potential $480,000 capital gains tax bill if she sells to diversify. The article explores using a Charitable Remainder Trust (CRT) strategy to sell the stock tax-free, generate retirement income, and leave a charitable legacy to her alma mater and a community foundation. It explains how the CRT works: the stock is donated to the trust, sold tax-free, and the trust pays her income for life, with the remainder going to charity. The article compares this approach to alternatives like direct sale, exchange funds, and charitable gifting, noting the CRT's trade-offs including irrevocability, loss of step-up in basis at death, and the need for a charitable intent.