Under the terms of a charitable lead trust, it is the university, as current beneficiary, which receives the income stream during the trust term. At the conclusion of that term, the remaining trust assets are returned to you or, more frequently, to other beneficiaries such as your family members. As with remainder trusts, the income distributions can be made in a fixed amount, through an annuity trust, or in variable amounts, through a unitrust. Cash, securities, or real estate can be used to fund a charitable lead trust, and you may receive a gift or estate tax deduction at the time of the gift. The discount on estate taxes may be of significant benefit to family members when assets substantially appreciate over the life of the trust. Maximizing your contributions to both family and the university can provide tremendous gratification.
 Non-Grantor Lead Trust 
At seventy-eight, Nellie Kneeler knew the substantial size of her estate raised transfer tax issues. Well versed on estate planning matters, she was familiar with charitable bequests, but knew she would also enjoy seeing her generosity have a more immediate impact. She also wanted to plan well enough to pass on a significant inheritance to her two sons, Nathaniel and Nehemiah. With the assistance of her attorney, Phillip Pharisee, Nellie used a $5 million portion of her investment portfolio to establish a charitable lead unitrust with CUA as the income beneficiary. The securities used in funding the gift were mainly blue chip stocks primed for growth, including shares of Hefty Herods, a popular new restaurant chain known for its all you can eat buffet and healthy servings of wine. As a result, CUA will receive income installments totaling $250,000.00 in the first year, with the potential for that amount to increase annually in the remaining years of Nellie's life. The university would use the payments to fund the Nellie Kneeler Endowed Scholarship Fund, which will benefit CUA undergraduates in perpetuity. The remaining trust principal will eventually go to her sons, who will have benefitted from any growth in the assets during the trust period and from Nellie's applicable gift tax deduction of over $1.7 million.
Grantor Lead Trust
A highly successful businessman and entrepreneur, Virgil Vespers had long been a sports enthusiast, as well as a major donor to CUA. He recently had made a pledge of $2.5 million over five years to the Competitive Edge Campaign, CUA's effort to attain cutting -edge athletic facilities through renovations and additions. With a high level of annual income, Virgil chatted with his accountant, Natalie Nativity, about possible income tax deductions. Following up on Natalie's suggestion, and in light of his pledge to the university, Virgil decided to establish a grantor lead annuity trust, to run for a term of five years, with CUA as a current beneficiary. This instrument would enable him to accelerate his income tax deductions for future gifts into the current year. He had also learned that the current economy's low interest rates made this an ideal time for maximizing his deduction amounts through such an arrangement. A trust funded with $10 million in securities will provide CUA with annual payments of $500,000.00 for five years, and will provide Virgil with an income tax deduction of nearly $6.8 million. The trust assets will revert back to Virgil at the end of the trust term, and in the meantime, he will have greatly enhanced the CUA experience for our many student athletes.
(Note: Figures shown in the examples are used for demonstration purposes only, and are based upon assumptions that may not be applicable in every case. Specific amounts will differ in individual cases depending upon the size and timing of the gift, the current or applicable rates, and other relevant variables.) |
