Free Wealth Management Guide Investing Proceeds From the Sale of Farm or Ranch | Page 2

subject to tax. With the help of the wealth management
consultant, this $1.5 million was invested in a diversified
portfolio of mutual funds within the trust for the benefit of
Bob and Mary. They chose a 7% payout rate with the CRT,
which provided them a first year income of $105,000.
Bob and Mary paid tax on the remaining sale proceeds.
This tax was largely offset by the charitable income deduction they received from making the gift to the Charitable Remainder Trust. They were also able to withdraw
$300,000 tax-free from the sale of their home through the
Personal Residence Exclusion. By using the 1031 Exchange, Charitable Remainder Trust, Personal Residence
Exclusion, and other tax saving strategies, Bob and Mary
reduced their tax bill from over $600,000 to less than
$100,000.
The net cash available after paying tax and investing in
the Social Security building and CRT was $1.4 million.
They used $490,000 of this cash to purchase a new home
on a small acreage in Montana and a second home in
Arizona. Something they long desired but never had the
cash or time to do was to take their kids and grandkids to
Disneyland. They used $20,000 to take this long awaited
trip. They deposited $50,000 into a money market account. The balance of the funds was invested in a diversified mutual fund portfolio comprised of 40% stock and
real estate funds and 60% bond funds. From this portfolio, they made annual distributions of 7%, providing a first
year income of $77,000.
From their annual income, Bob and Mary made annual
gifts to a college savings plan for their grandchildren.
They established a small college scholarship fund for
their local high school graduates. They purchased a $1
million second-to-die life insurance policy on their lives
to replace the money gifted to their CRT. Their attorney
and life insurance agent helped them set