How the Rich Sell Crypto Without Paying Taxes

Big crypto profits are great until the tax bill shows up. But don't worry, if you're sitting on massive crypto gains, there's a legal way to keep them working for you without the upfront tax hit. For example, if you sold Bitcoin or XRP or Solana recently after a big run up, you might owe 30% or more in taxes. That means a $1 million sale could hand $300,000 straight to the IRS or the state tax commission. But here's the secret. The wealthy know there's a completely legal way to sell crypto and pay zero tax upfro while still keeping control of your investments and creating lifelong income. And I'm going to walk you through the whole process step by step, so that you can do it too. My name is Mark J. Kohler, CPA attorney and bestselling author. And today I'm going to show you exactly how to reduce or even eliminate your tax bill from crypto gains using something called the Charitable Remainder Trust or crut. Charitable Remainder Unit Trust for short. Stick around because by the end of this video you'll understand how to turn highly appreciated crypto into tax free income producing wealth, legally and ethically. Let me show you how it's done. First, let's talk about the problem with selling crypto the traditional way. When you sell crypto assets held for more than 12 months, it's taxes long term capital gain first. Now that's a 20% federal rate plus 3.8%, what's known as the net investment income tax plus any state income tax. And that adds up quick. Very well could be over 30 to 35% in some states. Sell sooner than that, you're hit with ordinary income tax rates as high as 37%, then add the state tax to that. So whether you're a long term holder or an active trader, every sale triggers tax, even crypto to crypto transfers or swaps. This is because the IRS recognizes crypto as property, not as currency. So whether you sell it, convert it, trade it, not even moving it back to US dollars, it's a taxable event. So one of the legal loopholes the wealthy use is the Charitable Remainder Unit Trust or crut. The CRUD is a special type of irrevocable trust. You donate the appreciated assets, the crypto, sell them tax free inside the trust, then receive income for life, you get asset protection, and the remainder of whatever's left after you die goes to charity. So, high level, let's go through how it's structured then I'm going To take you through nine steps in detail of how you implement this. So first, you're going to create this trust so that you can then transfer your appreciated assets, the crypto, and into the trust. So then the trust, which is a charitable trust, is going to sell those assets tax free. The proceeds stay invested inside the trust and you receive a fixed income stream for life. When the trust ends, whatever's left, the remainder goes to the charity that you designate at the beginning. Think of it like splitting your assets into two parts. The income piece which comes back to you every quarter of every year. And then the charitable remainder is what goes to charity later on. It's perfectly legal under IRS code section 664 and used for real estate, stock. And now crypto. There's five big benefits, if not more, you get with the crut. First, you're selling the crypto tax free so that you have a bigger pie or bucket to work with. Number two, you get an immediate charitable deduction. Did I mention that? Because you're going to be giving this wealth to the charity when you die 20 years or longer away, you get a tax deduction today for doing that. Number three, you receive that income for life. That's the beauty of it with the bigger bucket is that there's a calculation to give you this stream of income. Number four, it's completely asset protected from any lawsuit. No plaintiff or creditor can get at the assets inside the trust. And finally, if you remember, I said you get to remain the investment trustee so you can continue to trade and buy more crypto tax free. Essentially inside this trust is the value of that bucket goes up. So Instead of paying 30% or more in tax, now you keep 100% of it and continue to turn it into lifelong cash flow. Now let's get into the detail and break down all nine steps of the process. It's important you know this as you work with your tax advisor so that you're very involved and understand what you're trying to implement from the beginning. Step one is we're going to create this charitable remainder unit trust. You're going to work with an attorney to draft it before you even transfer or sell your crypto. Otherwise the IRS will see the gain as personally yours and the tax strategy is lost. Step two is you're going to then donate the crypto to the trust. You may ask, how do I do this? Well, you're simply going to set up a wallet for the trust. You're going to just transfer the crypto, not sell it. Transfer the actual tokens into this new wallet. Now, when you do this, it's treated as a charitable contribution. Now that the crypto is in the trust, we're ready for step three. We're going to sell the crypto and bring it all back to US Dollars. Keep that wallet alive and well so that you can do additional trading, but also create a bank account for the trust so that you can fund that bank account when it's time to pay you. But again, the beauty is the trust is a tax exempt entity as a charity and it gets to sell all of that crypto tax free. This means you keep the entire sales amount working in compounding inside the trust. Now, remember that tax deduction I talked about? That's step four. And so we're going to calculate the present value of what that future gift to charity is going to be after you die. It's based on your age and federal interest rates and things like that. And that present value of the future charitable gift is a tax deduction on your tax return. Right. Now that tax deduction can also offset other income in the same year. So it can go against your W2 and other income because you would itemize in this given year because of this large charitable deduction. Now, the real fun begins in step five. We're going to do an annual valuation to figure out what your distribution is going to be. Now, the year you form this and transfer the crypto and sell it, that's going to peg the valuation for that year. But every January thereafter, you're going to use a third party administrator to value the trust. Now, another important piece in this is figuring out what your payout percentage is. So that valuation we're making is going to be used against this percentage. Now, this percentage is based on your age and gender. It goes to an actuarial table at the irs. And based on that table, we're going to figure out how long we think you're going to live. I know, not fun. But when we figure out that time period, we work backwards. And the IRS says, okay, this is how much can be paid out every year to ensure that something will go to the charity. The older you are, the bigger the payout percentage, because they expect you not to live as long. I would think around the average of 10% is when you're age 55 to 65, somewhere in there. So anyway, once that percentage is determined, and we do it once upon the form formation of the crud, that's going to be used every quarter against that annual valuation. So the charitable trust is going to Give you this distribution which is step six every quarter based on the annual valuation every January. It's important to note that that distribution is taxable to you, but it's not the end of the world because we have now been able to spread out that gain of yours over time, which will put you in a lower tax bracket. And also we have a bigger bucket or pie that we're investing from because we didn't pay tax at the begin. But those distributions will be taxable to you every quarter during your the rest of your life. Now that brings us to step seven and you might be surprised who's really upset about this strategy. It's not the IRS or the government. This helps a lot of charities, schools and churches, this crutch structure. It's the family members. Some of the family is wondering why did all that crypto end up going to a charity? It should go to us. Well, we want to take care of them too. So we combine the crud with an eyelet. It's called a irrevocable life insurance trust. So some of that quarterly distribution can be allocated to a life insurance policy based on your life and it's just automatically funded for a few years until it can sustain itself and then it's sight unseen. It's just there, plug and play. So as you go on for the rest of your married life, those payments come out. Fund the life insurance and this trust will pay out to your heirs tax free outside of your estate. This brings us to step eight, that fateful day when you pass away and the remainder goes to the chose in charity. This trust will stay in effect for 20 years or your life expectancy, whichever is longer. So if you were to set up this trust next month and fund it with a million dollars, those payments are going to continue and that trust will live on for another 20 years, paying out to your family members until that 20 year mark, then it'll go to charity. Now if you live 30 years, then it's going to wrap up on that 30 year mark again, your life expectancy or 20 years, whichever is longer. And the beauty of this, you get to name one or multiple char that you own or control. Could even be a family foundation that you set up during your life. So this charity could really be your family legacy. So that brings us to step nine, that true family legacy concept. Because we're really bringing together two things. That tax free life insurance that goes to your family, but also this charity that you might designate and have family members serving on the board. So this family foundation lives on Carrying out good works in your name, while the rest of that life insurance money goes tax free to the family. This lets you transform what would have been a large tax bill into a lasting income source, a charitable impact and a generational wealth plan, all within one coordinated strategy. Now let's talk about why it works and why the IRS allows this. The government who manages the IRS actually wants to encourage charitable giving. So the credit income to you is taxed only as you receive it, not when the crypto is sold. Your donation must be be irrevocable. Once we've set up this trust and you transfer the assets, it's over. It's irrevocable and you must be committed to the plan. But as I mentioned, you keep control of the assets and over what the trust invests in. It could be crypto stocks or even real estate, just passive investments. And the payout rate is based on your age and gender. And you'll know exactly what your rate's going to be against that annual valuation for the rest of your life. Quick example. Let's say you bought some crypto for 200,000 and now it's worth a million dollars. That's an $800,000 gain. Now, normally you'd roughly pay about 200, $250,000 in tax, but instead you transfer that crypto into the crut, sell it tax free and get approximately $100,000 tax deduction. You get to reinvest that million dollars inside the trust and draw approximately 50 to even $150,000 per year based on the rate designated under the tables at the irs. When you pass away, the remaining balance go charity and your heirs inherit a big chunk of money tax free. That's how you turn a $300,000 tax problem into a lifetime income stream and a lasting legacy. So there you have it. The same strategy the wealthy have used for decades to sell highly appreciated real estate or stock. Now applying it to crypto by setting up the Charitable Remainder Unit Trust, you too can sell crypto tax free, create guaranteed income for life support, a charity you believe in, and protect your family's future. If you're serious about making this work, please reach out to my law fir KQS lawyers for a consultation. We've helped thousands of clients set these up and quickly. And if you got value from this video, please hit like subscribe and share it with someone who needs to know how the wealthy really sell crypto and pay zero tax legally. I'm Mark J. Kohler and thanks for watching. I'll see you in the next one.