Charitable Lead Trust

Charitable Lead Trusts

A charitable lead trust arrangement permits the giver to designate regular, annual, or more frequent gifts of the income from the trust to charitable institutions. At the end of the selected term of years, or at the death of the donor; the principal of the trust reverts to the donor or two designated beneficiaries, probably children or other family members, but possibly charitable institutions.

If Mr. and Mrs. ILoveStAndrew wanted to provide support for the parish for a certain term of years, or for the rest of their lives, they might consider using a Charitable Lead Trust. They could transfer $1 million to a trustee and provide that 6% (or some selected percentage) of the initial net fair market value of the trust assets be paid by the trustee to the charity. The trust would continue for as long as either of them lives. Upon the death of the survivor, the trust assets would revert to their children, as Mr. and Mrs. ILoveStAndrew wished. The trust would make the fixed annual payments to the charity, and at the termination of the trust, the children would receive the assets. This gift arrangement is an important consideration for people who have estates that are large enough to place them in higher federal income-, gift-, and estate-tax brackets.

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