Charitable Lead Trusts

A charitable lead trust allows you to donate to nonprofit organizations, like the Fisher Center, for a certain number of years, while leaving the remaining assets to individuals designated by you. To create such a trust during your life, you must transfer assets (e.g., cash, stocks, real estate) to a trustee through a trust agreement. The trustee then invests your assets and makes payments to the nonprofit organization(s) of your choice for a specified number of years. When the term of the trust ends, the assets—plus any appreciation in their value—will pass to designated non-charitable beneficiaries.

There are two main types of charitable lead trusts available, depending on what type of payments you wish the nonprofits to receive. An “annuity trust” pays the nonprofit a fixed amount annually, while a “unitrust” pays the nonprofit a different amount, recalculated each year, based on a specified percentage of the fair market value of the assets in the trust.

Through the use of a charitable lead trust, you may reduce gift taxes incurred when transferring assets to non-charitable beneficiaries (e.g., children, grandchildren). A charitable lead trust can also be created at your death under your Will, allowing for a possible reduction in estate taxes.

Due to the technical requirements of charitable lead trusts, it is important to review the tax implications of such trusts with your tax advisor.