Oscar J. Craig Heritage Society Gift Planning Corner

Grow your assets without growing your heirs' tax bills: The Charitable Lead Trust

If you want to put your donation to work right now and also provide an inheritance for your family, consider setting up a charitable lead trust. Doing so will provide immediate support to UM. Meanwhile, you will have reduced your taxable estate and property kept by your family, often with reduced gift and estate taxes, and provided a means for your heirs to receive future financial benefits. The IRS Discount Rate is inversely related to the charitable deduction for lead trusts. At this time, the IRS Discount Rate has been at historical lows and therefore deductions for lead trusts are at historical highs.

Here’s how it works:

(1) You give assets to an irrevocable trust that pays the UM Foundation a payment for a term of years you select or for a person’s life.

(2) When the trust term ends, individuals (“remainder beneficiaries”) receive whatever remains in the trust (“remainder interest”).

(3) You select how much the UM Foundation receives and choose the remainder beneficiaries. You also determine how the annual proceeds are used.

Example: You give $250,000 to a charitable lead annuity trust that will pay the UM Foundation 6 percent annually for 20 years and thereafter give your children the remainder interest. Assume the trust’s net return is 6 percent annually, and the applicable IRS valuation rate, which changes monthly, is 1.4 percent. This chart illustrates the approximate results.

Charitable Lead Trust Example

To learn more about the different types of charitable lead trusts and how they might benefit you, your family and UM, please contact us at 800.443.2593.