Estate Planning > Planned Giving > Charitable Lead Trust

A donor may have a large portfolio of appreciated assets that he doesn’t need as part of his retirement plan and wants to pass on to his heir(s). He would like to use these assets during his lifetime to support a charity. The assets will generate unwanted taxes upon his death, and he is concerned that his heirs do not yet have the maturity to properly manage them.

A Charitable Lead Trust receives cash or property from a donor, makes payments to the charity for a specified period of time, and then makes a tax-reduced or tax-free distribution of the remainder of the Trust to one or more designated beneficiaries. The donor gets a tax deduction at the time the Trust is established and then, with the right planning, makes a tax-reduced or possibly tax-free distribution of the remaining trust assets to one or more designated beneficiaries.

Charitable Lead Trusts come in two basic forms. A Charitable Lead Unitrust makes payments to one or more charities equal to a fixed percentage of the fair market value of the Trust property, determined annually. A Charitable Lead Annuity Trust must pay a guaranteed annuity amount to one or more qualified charities at least annually.

The Benefits

  • Reduction or elimination of gift and estate taxes
  • Assets transfer tax free to heirs at a time when their life skills have increased and they are able to manage the assets
  • The Fellowship receives support for a period of years while the donor may still be alive to observe the good that is being accomplished by the gift

Download or request a free copy of The Fellowship’s Planned Giving Ideas and Options Guide>>

The Streeter’s Charitable Lead Trust Story

John and Kim Streeter own a strip mall that they purchased a number of years ago for $250,000. The property is debt free and currently valued at $1 million. It produces net income from fixed-payment leases of $80,000 per year. Also, John and Kim estimate that the property will continue to grow in value by the rate of inflation over the next 10 years. They do not need the income from this property and are interested in transferring this asset to their children, ages 18 and 19. However, they are very concerned about their children’s age and ability to manage sudden wealth as well as the gift and estate tax consequences.

In consultation with their financial planner and a Planned Giving Representative at The Fellowship, John and Kim decide to set up an 8 percent annuity lead trust funded with the strip mall, which will pay income to The Fellowship for a period of 10 years. After 10 years, the property will be transferred to the children tax-free.

 Planned Giving Options
Planned Giving Options

Read our Planned Giving Options guide and find the best way to realize your Estate Planning goals while blessing Israel through a legacy gift to The Fellowship.

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Contact Us

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