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BK-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 835
Experience:  Owner of a CPA firm
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I received an inheritance 5 years ago. It was commercial property

Customer Question

I received an inheritance 5 years ago. 27 relatives sold the land, keeping the mineral rights. My share was 430K. It was commercial property so I invested half the funds I received at the sale in rental property. I put $200K into a Charitable Remainder Trust as recommended by my CPA. It was in bonds and mutual funds. I told him I didn't want to be in the stock market. When the big drop occurred, I lost over half my investment. He did not warn me when the downhill slump began. When I realized what had happened, I pulled the mutual funds and put $79K into a Met Life Variable Annuity and 4K into the Wells Reit Fund. I'm losing more money as the bonds aren't doing well and the met life variable annuity has also lost money. I have spoken with a trusted financial advisor and wish to put the funds into a Fixed Annuity. I do not have any confidence in my CPA and cannot afford to lose any more money. I am 72. Can I dissolve the Charitable Remainder Trust and just put it in the name of my own trust? If so, would I pay heavy taxes as my CPA says I would? Can I dissolve the bonds and put them into the Fixed Annuity Fund?
Submitted: 4 years ago.
Category: Tax
Expert:  BK-CPA replied 4 years ago.

I agree that canceling your charitable remainder trust now would carry tax consequences, namely because you already received a deduction upon its creation.


Assets that are investments within the trust could be replaced by other assets more suitable (profitable) without voiding the trust agreement itself. That appears to be a more practical solution for you, assuming your problem is with the performance of the investments and not the trust itself. Look to your trust agreement too for any specifics with your personal trust.


Again, assuming your issue is of course the losses and not the trust itself, then you also need to consider that CPA's do not typically give stock tips on any sort of a professional level (they are not licensed for that in general). You would be leaning towards (full service) brokerage firms, investment advisory firms, and or portfolio management firms for advice as to "what should I invest in." The CPA told you how to invest (the trust) for tax purposes, but you are typically free/expected, as I said, to manage the income producing assets of a charitable remainder trust to the best of your (the trustee's) ability.


I'm sorry your investments did not pan out that well. Most peoples' did not, but many managed to make some money back too and may continue to here going forward. This may not be what you want to hear, but ultimately you must watch your own investments first and foremost, you need to hire the right person(s) for managing investments if you (like most people) want someone that is likely to do a better job than you, and finally, you need to make a rational decision now (your CPA may actually still be quite competent from what I can tell at this point, seeing as how many a (certified) financial advisor/planner/analyst/etc. lost money during the crash, and otherwise it sounds like you may have (had) some solid tax planning in place...).


Good luck. Thank you for your question and let me know if there is something more I can clarify.

Edited by BK-CPA on 9/2/2010 at 7:33 AM EST

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