Charitable Lead Trust
Charitable lead trusts are gift plans defined by federal law that allow individuals to transfer assets to family members at reduced tax cost while at the same time making a significant gift to charities such as FIU. They have become increasingly popular since the 1990s since they are especially effective during times of relatively low prevailing interest rates.
Sometimes described as "the reverse" of a charitable remainder
trust, under a charitable lead trust an individual irrevocably
transfers assets, usually cash or securities, to a trustee,
usually a financial institution. During the trust's term, usually
a fixed number of years, the trustee invests the trust's assets.
Each year, the trustee makes payment to one or more charities
out of the trust's income, or trust principal if the income
is not adequate. When the trust term ends, the trustee distributes
the accumulated trust assets to family members or other beneficiaries
named by the donor. In most cases, the accumulated assets pass
to
family members on a tax-free basis. Adjustments in the payout rate to charity
and the term of years of the trust can be made to maximize
either gift or estate tax deductions.
A charitable lead trust can also take either the unitrust or annuity trust form. Under a non-grantor charitable lead unitrust , the trustee makes payments to charity based on a fixed percentage of the trust's assets, revalued annually. With a non-grantor charitable lead annuity trust , the trustee distributes a fixed dollar amount to the charitable beneficiaries each year.
Benefits: benefits of a charitable lead trust include the following:
- Trusts created during a donor's lifetime qualify for a significant gift tax deduction ; trusts created by will qualify for an estate tax deduction .
- Beneficiaries of the trust (usually family members, including grandchildren) will receive all the trust's assets when it terminates. Any asset growth that occurs during the period will be distributed to the beneficiaries free of gift or estate tax.
- FIU and any other charitable beneficiaries receive gifts for the entire term of the trust.
Establishing a charitable lead trust necessitates the assistance of an experienced tax or estate planning attorney. For more information about charitable remainder trusts and a free customized computer analysis of its benefits that fits your financial situation, contact Roger Wyman at the address below. Jeffrey G. Fischer
Executive Director
Office of Planned Giving
Office of Corporate & Foundation Relations
MARC 557
305.348.0130 phone
305.348.3337 fax
fischerj@fiu.edu
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