Charitable Lead Trust: The Details
Is this gift right for you?
A charitable lead trust is for you if…
- You hold appreciated assets that you want to pass on to the next generation.
- You want to reduce your gift and estate taxes.
- Your primary planning objective is to preserve the value of your estate, not increase your income or reduce your income tax.
- You want your gift to provide a stream of income to JDRF.
There are several types of charitable gifts that reduce your tax costs for transferring assets to your heirs. A charitable lead trust is one of the best tools for tax savings on passing intergenerational transfers of wealth to your heirs. In a nutshell, a lead trust holds appreciating assets for a term of years (or for your lifetime), and makes quarterly or annual payments to JDRF. JDRF benefits from the stream of reliable, steady gifts from the lead trust, and you’re able to witness the good work your contribution makes possible during your lifetime. At the end of the trust’s term, all remaining trust assets are distributed to your designated beneficiaries with greatly reduced gift and estate tax, regardless of how much the trust has grown. A lead trust can be structured to totally eliminate estate and gift taxes on trust assets.
Two Types of Lead Trusts
Charitable Lead Annuity Trust
A charitable lead annuity trust, sometimes referred to as a CLAT is usually the best option for reducing or eliminating estate and gift taxes on assets passed to your children. It enables you to give a fixed annual amount to JDRF for a term of years or for the life of one or more individuals. At the conclusion of the trust’s term, the trust terminates and distributes its remaining assets to the individuals you designate in the original trust document. Your lead trust greatly reduces or eliminates estate and gift taxes on the assets you place in the Trust.
Charitable Lead Unitrust
A charitable lead unitrust, sometimes referred to as a CLUT, will give a variable annual amount to JDRF for a term of years or for the life of one or more individuals. At the conclusion of the trust’s term, it distributes its remaining assets to the individuals you designate in the original trust document. Your lead trust greatly reduces or eliminates estate and gift taxes on the assets you place in the trust.
Both the charitable lead unitrust and the charitable lead annuity trust are wonderful tools to help families support JDRF while protecting intergenerational wealth from gift and estate taxes.