Charitable Lead Trust
A charitable lead trust is a philanthropic and estate planning tool. A donor can transfer assets, such as cash, and appreciated stocks, to the trust. Each year, payments are made from the trust to the donor's designated charity for a set term. It is called a lead trust because the charity is entitled to the lead (or first) interest in the trust asset and the non-charitable beneficiary receives the remainder (or second-in-line) interest. Once the trust's term expires, what is left goes to the donor's heirs. You can receive a federal gift or estate tax deduction for the present value of the payments that go to the Lustgarten Foundation.
Two Types of Charitable Lead Trusts
Charitable lead trusts are of two types: charitable lead annuity trusts and charitable lead unitrusts. In the annuity trust, the donor sets a fixed annual gift for the charity named. In the unitrust, the charity receives a percentage of the trust's value each year. This means that those benefits will fluctuate based on the trust's investment returns or losses.
Annuity trusts are the most popular because the charitable payments are fixed. In the unitrust assets grow and the percentage going to charity uses up more and more money, thus leaving less for the heirs.
What to do next:
• Contact our office to let us know of your intentions.
• Seek the counsel of your financial or legal advisor to assist you in planning and creating a charitable lead trust.
• Select a trustee to manage and invest your charitable remainder trust. This may be an institutional trustee, such as a bank, or it may be an individual you select to manage your trust.