The Retirement Income Enhancement Trust (RIET)
Imagine you holding onto an uproductive piece of real estate or land, stock in a family with no readily market, or a stock paying little or no income. How are you going to generate income for retirement from these resources? These assets do not produce interest or dividend incomes nor can you convert them easily into cash.
If you’re retired and you hold illiquid assets such as those mentioned above, the Retirement Income Enhancement Trust (RIET) may be the answer for you. This trust is an asset conversion strategy that focuses on producing retirement income while at the same time attempt to reduce your taxable estate.
The RIET takes advantage of the tax-favorable status of a tax-exempt trust to convert illiquid assets into retirement income for your immediate cash flow needs. This special trust allows you to benefit from the FULL VALUE of the assets transferred to the trust, not just the net assets after reduction for capital gains tax.
How Does the RIET Work
Suppose you’re 60 years old and have unimproved real estate in a developing area. It does not generate any income currently. You bought for $200,000, and now it has appreciated to $1,000,000. The potential capital gain is $800,000. At 20% capital gains rate, you would lose $160,000 in taxes. You would love to sell this property, but you don’t want to pay the capital gains tax.
Utilizing the RIET, you could:
- Remove the $1,000,000 from your estate
- Avoid the loss of $160,000
- Obtain a charitable income tax deduction, and
- Create a lifetime of retirement income from an asset that did not generate income before.
While you would not completely avoid the tax on your income, you would pay at a lower rate than your ordinary income tax rate.
The RIET is a WIN-WIN-WIN Strategy
Now that you are receiving an income from the illiquid assets, you could use a portion of that income to replace the $1,000,000 you removed from your estate through a Gift Trust to your heirs. While you’re alive, you continue to receive income. Upon your death, your heirs receive the $1,000,000 through the Gift Trust, and your favorite charity receives the remaining assets in the RIET… A WIN-WIN-WIN for all involved.
Click here to contact us for a complimentary review to find out how the Retirement Income Enhancement Trust may help you turn Illiquid Assets into a Stream of Lifetime Income for You and Benefit Your Favorite Charity at the Same Time.
