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You give assets to a trust that pays the University of Minnesota Foundation an income for a number of years, which you choose. The longer the length of time, the better the gift tax savings for you. When the term is up, the remaining trust assets go to you, your family or other beneficiaries you select. This is an excellent way to transfer property to family members down the line (typically children and grandchildren) at a minimal cost.
There are two basic types of charitable lead trusts: a grantor lead trust and a non grantor or family lead trust. Which one is right for you?
In a grantor lead trust, you are considered the owner of the trust. You receive the remainder interest at the end of the trust's term. As the owner, you are taxed on all the income. You are entitled to claim a current federal income tax deduction for the present value of the income payments to charity. This type of trust works well if it is funded with municipal bonds.
A more popular option is the non grantor or family lead trust. With this type of trust, your family members receive the remainder interest at the end of the trust's term. You do not qualify for an income tax deduction. However, you will receive a charitable gift tax deduction for the present value of the charity's interest. This is an excellent way to transfer property to family members down the line at a minimal tax cost. This type of charitable lead trust is especially appealing to the University of Minnesota Foundation supporters who have appreciating assets and are financially comfortable enough that they can forgo investment income on some assets.
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The information on this website is not intended as legal or tax advice. For legal or tax advice, please consult an attorney. Figures cited in examples are for hypothetical purposes only and are subject to change. References to estate and income taxes apply to federal taxes only. State income/estate taxes or state law may impact your results.
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