Charitable Lead Trusts: Getting Started
Do you want to benefit from the tax savings that result from supporting Wisconsin Lutheran College, yet you don't want to give up any assets that you'd like your family to receive someday? You can have it both ways with a charitable lead trust.
How It Works
You give assets to a trust that pays Wisconsin Lutheran College 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.
Charitable Lead Trust
You give cash or property to your charitable lead trust.
Your Charitable Lead Trust
Wisconsin Lutheran College receives yearly payments.
Wisconsin Lutheran College
Remaining trust assets go to family at end of trust term.
Fixed or Variable Charitable Payments?
A charitable lead trust can make payments in one of two ways: A charitable lead annuity trust pays a fixed amount each year to Wisconsin Lutheran College, whereas a charitable lead unitrust (the less common type) pays a variable amount each year based on the value of the assets in the trust. With a unitrust, if the trust's assets go up in value, the payments to our organization go up as well. On the other hand, if the assets decrease in value, so do our payments.
Did you know?
You can create a lifetime charitable lead trust to take effect today, or you can set up the trust to take effect at your death (a testamentary trust).
Your Main Benefits
Assume you pass away leaving a taxable estate of $10 million in 2013. For each $1 million over the estate tax threshold that you leave to your family, estate taxes could consume up to $400,000 and your heirs will receive only $600,000. With a lead trust, you can transfer $1 million to your heirs—albeit after your death—leaving only $51,1601 subject to tax, instead of $1 million.
To accomplish this, you create a $1 million lead trust from your estate (a testamentary charitable lead trust) that will pay a qualified charitable organization $60,000 annually for 18 years. When the trust ends in 18 years, the remaining trust assets will go to your named beneficiaries.
This is just one example. The size of your trust and its terms are up to you.
We Can Help
Contact Kristine Metzger at 414-443-8925 or firstname.lastname@example.org for more information about this type of gift that supports our work and helps you meet your financial goals.
1Based on annual payments and a 1.4 percent charitable midterm federal rate; this rate changes monthly.
Your Next Steps
Getting Started | Helpful Definitions | Is This Gift Right for You? | Case Study | The Best Time to Make This Gift | How to Complete Your Gift | Action Items
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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.