Giving back to community and your loved ones.
A Charitable Lead Trust helps you build a charitable fund with your community foundation during the trust’s term. When the trust terminates, the remaining assets are transferred to you or your heirs, often with significant transfer-tax savings.
You transfer assets into a trust, which pays the community foundation an annual amount to build a charitable fund. During its term, the trust can be managed expertly by experienced trust professionals, which may help your trust investments grow over time. When the trust terminates, either upon your death or after a specified number of years, its final assets are transferred to those you designate; any growth in the trust passes to recipients, often with significant transfer-tax savings.
A Charitable Lead Trust entitles you to a number of financial benefits. It shelters investment earnings from tax, and it offers gift, estate, and generation-skipping tax benefits. For example, trust assets are removed from your estate for estate tax purposes. You may also capture future gift tax deductions. However, at the time your trust is established, you may owe gift tax on the present value of your gift to the final beneficiary.
You have several options when establishing your trust. You can create a Charitable Lead Trust during your life or through your will. The trust contributes to charity through your community foundation—either for a number of years or for your lifetime. And, you select one of two types of Charitable Lead Trusts. A Charitable Lead Unitrust makes annual distributions of a fixed percentage of the trust assets to the charitable fund you establish. If you create a Charitable Lead Annuity Trust, the charitable fund you establish will receive a fixed dollar amount each year.
Example Donor Story
A lifetime gift for two.
Annette Bernack wanted to create a fund to support her favorite charitable interests for years to come. At the same time, she wanted to provide an inheritance for her daughter in a way that created the least tax burden. “My attorney told me that creating a Charitable Lead Trust and designating my community foundation as the beneficiary would allow me to give to the community now and provide for my daughter later,” says Annette. Using a regular distribution from the trust, Annette has already begun to build a fund at her community foundation, which is, in turn, making grants to her community in areas important to her. The trust will continue to build the Bernack Family Fund until her death, after which the rest of the trust will transfer to Annette’s daughter. “By giving through a Charitable Lead Trust,” says Annette, “I am doing more for both my daughter and the community… and my estate will owe less in taxes.”
There is so much more we’d like you to know. For more information and ideas on ways to integrate your financial planning with charitable giving, ask your financial advisor or contact Tami Wenning at email@example.com.