What is a Charitable Lead Trust?
A charitable lead trust is a trust that makes annual payments to a charity for a certain number of years, after which the trust assets will pass to non-charitable beneficiaries designated by the donor (typically children or grandchildren). The annual payments to charity can be either a fixed annuity amount or a fixed percentage of the fair market value of the trust each year. A charitable trust that pays a fixed annuity amount is called a charitable lead annuity trust; a charitable trust that pays a percentage each year is called a charitable lead unitrust. Why is a Charitable Lead Trust so Attractive in a Low-Interest Environment? The reason why it is such an opportune time to establish a charitable lead trust is that the rate used to calculate the present value of charitable payments, called the Section 7520 rate, is based on federal interest rates and changes each month. As the federal interest rates decrease, so does the Section 7520 rate, which in turn allows for a greater charita
A charitable lead trust is a plan for giving that can transfer substantial assets to your heirs at a reduced tax cost by directing the income from those assets to the University of Nebraska for a designated period of time. At the end of the period, the assets are returned to you, your heirs or others you name. A charitable lead trust allows you to make a gift to charity now and pass assets to family members later. What are the benefits of giving to the University through a charitable lead trust? A charitable lead trust is particularly beneficial if the assets have great appreciation potential, because trust assets are valued for tax purposes as of the date the trust is established rather than when they pass to your heirs. Can I establish a charitable lead trust with either a fixed or variable payout to the University? Yes. The payout, if fixed, would be a percentage of the value of the assets at the time the trust is established; if variable, the payout would be a percentage of the val
A Charitable Lead Trust (CLT) pays an annual income to WSPA for a specified term (either a definite number of years or the life of one or more individuals). The income can be either the same amount every year or vary with the value of the underlying investments. At the end of the trust term, whatever is left in the trust goes to heirs you specify. How does that create an estate and gift tax “discount”? With this trust you are making a gift to your heirs (albeit in the future). Because you create an income to WSPA with the trust, tax regulations allow you a charitable gift tax deduction. This deduction can offset all or a portion of the gift to your heirs. Can you give an example? If you establish a Charitable Lead Annuity Trust that lasts for 20 years and pays WSPA an income of about 8.5%, you will be eligible for a charitable gift tax deduction of almost 100% of the initial value of the trust. Whatever remains in the trust at the end of 20 years, passes to your heirs estate and gift t
Charitable lead trusts are a legal mechanism or strategy that makes if possible for organizations or persons to set aside assets that will benefit one or more people or groups. The income that results from any asset placed into the charitable lead trust trust is paid to the person or charity that is named as a recipient in the arrangement. At the same time, the actual ownership of the asset remains in the possession of the trust maker or persons specified as grantors by the trust maker. A charitable lead trust allows the originator of the trust to specify a specific amount of time that recipients will benefit from any income earned by the asset. During this period, the trust maker often still is responsible for taking care of any applicable taxes due on the generated revenue. These taxes may include estate taxes on property income, capital gains taxes on investment income, and standard federal and state income taxes. However, many examples of the structure for a charitable lead trust a
