A local attorney recently introduced us to a couple preparing for one of the biggest transitions of their lives: selling the business they had built and run together for 27 years. The business had grown steadily over time and was now worth close to $4 million. In addition to the company itself, they also owned the building in which it operated.
While excited about the prospect of moving into the next chapter of life, they were also anxious—mainly about taxes. They knew that selling the business outright could come with a hefty tax bill, potentially taking a large chunk out of what they hoped would be their retirement nest egg.
Because the attorney who referred them knew we had experience with advanced tax strategies, including charitable remainder trusts (CRTs), they suggested a conversation with our team at Mission Hills Financial.
We started by explaining a potential solution using a charitable remainder trust. In simple terms, the couple could transfer a significant portion of the business—say, 70%—into this trust before the sale. That means $2.8 million of their $4 million business could be sold inside the trust, bypassing capital gains taxes on that portion. The proceeds in the trust would then be invested, generating regular income for them for the rest of their lives.
In this case, the trust was expected to produce around $18,000 a month in income. That steady stream gave the couple peace of mind—they would have a predictable income without worrying about managing the money day-to-day. And when both spouses eventually pass, the remaining assets in the trust will go to a charity they care about.
What about the remaining 30% of the business, the $1.2 million not placed in the trust? Here’s where the strategy added another layer of benefit: Because they received a sizable charitable tax deduction for the part placed in the trust, that deduction offset much—if not all—of the taxes owed on the sale of the remaining portion.
That remaining $1.2 million was now fully in their control to invest however they liked—whether for growth, income, helping family, or simply taking a long-overdue vacation.
It was about taking something complex and uncertain and turning it into a clear plan for the future—and that brought a tremendous sense of relief