Charitable Lead Trusts Are An Attractive PropositionWhen a donor transfers his property, or assets to the charitable lead trusts, the trusts pay a percentage of the value of the assets donated. Such payment is usually made for a few years. The process is just the opposite of a charitable remainder trust. When the period of trust ends, the residue assets, including growth that it has sustained in the meantime, are transferred to the legal heirs of the donor. Unlike many other charitable gifts, you do not gain an income tax deduction for donating your assets to charitable lead trusts. However, you get a good bit of discount on the estate and gift taxes from what you need to pay. The growth sustained on the assets passes on to the heirs, and is free from gift and estate taxes. As a result, this turns out to be a way that can discount the value of the original asset, and simultaneously result in zero taxes, while at the same time you are able to fulfill your charitable desire. This makes the charitable lead trusts quite an attractive proposition to many. In case of a charitable lead trust, the typical donor has a moderate to large taxable estate, and is quite conversant in dealing with charities. Normally, the asset that the donor holds has good growth potential. The donor might want his legal heirs and successors inherit some of the assets. Gift and estate tax deductions on the value of the asset transferred, is the major benefit of this scheme. Even the growth transfer is tax free. The tradition of charitable donations provides a sense of a philanthropic and ideological achievement, and may give you immense mental satisfaction. Effective management of assets transferred is another benefit of the program. The donor can make a gift to charitable lead trust by cash or other assets. The donor can also enter into a trust agreement. On completion of the agreement period, the assets are transferred to the trustee. After the terms and conditions of the trust are fulfilled, the remainder of the assets is transferred to the legal heirs and successors in interest of the donor. The charity on the other hand uses the assets to further its mission for which the charitable lead trust is formed. The assets become the source of income paying annuity to the charity for the period mentioned in the trust deed. The main function of the trustees is to manage the asset so that it performs the charitable task, provides some growth, the required income, and also finally, leaves some portion to be transferred to the legal heirs of the donor. The most commonly used form of charitable lead trust is the non-grantor charitable lead annuity trust document. It is legally a very sound document. Under the process you transfer required quantum of assets to the trustee of the charitable lead annuity trust. These assets could be transferred by them on sale, or could be retained. Such action depends on the objectives desired. A portion of the original trust value is utilised for the specific trust purpose. Unlike the charitable remainder trust, there is no income tax deduction. But the income earned in the trust is not included for your income tax calculations. The trust itself is taxed on the basis of the trust rates, and receives a deduction for the income paid to the charity. |