Maybe. If the trust is structured a certain way, you’ll be eligible to claim an income tax deduction in the year you set up your trust. However, that means that all of the trust income in following years will be taxed to you as well. Most donors structure their CLTs in a way that does not yield a current income tax deduction so that they don’t have to worry about income tax issues in the future. In both cases, you are able to provide wonderful support to the Diocese and to pass trust appreciation to your family free of gift and estate tax. We can provide you and your advisors with information that will help you decide which type of CLT will work better for you.
Yes, you may list your grandchildren as beneficiaries. Due to the generation-skipping transfer tax, there are more complications related to a lead trust with grandchildren as beneficiaries than one that passes assets directly to children. Most legal professionals would prefer the use of a Charitable Lead Unitrust if grandchildren are named as beneficiaries.
There is no minimum or maximum term for your Charitable Lead Trust under federal law, although applicable state law may require such a trust to end eventually (typically after several decades). However, if you want to maximize the benefit to the Diocese and minimize transfer taxes, we can help you determine the optimum term to accomplish your goals. Generally, the longer the term, the lower the taxable gift to your remainder beneficiaries and the higher the benefit to Diocese of Trenton.
There are several types of charitable gifts that reduce your tax costs for transferring assets to your heirs. A charitable lead trust is one of the best tools for tax savings on passing intergenerational transfers of wealth to your heirs. In a nutshell, a lead trust holds appreciating assets for a term of years (or for your lifetime), and makes quarterly or annual payments to Diocese of Trenton. The Diocese benefits from the stream of reliable, steady gifts from the lead trust, and you’re able to witness the good work your contribution makes possible during your lifetime. At the end of the trust’s term, all remaining trust assets are distributed to your designated beneficiaries with greatly reduced gift and estate tax, regardless of how much the trust has grown. A lead trust can be structured to totally eliminate estate and gift taxes on trust assets.
Charitable Lead Annuity Trust
A charitable lead annuity trust, sometimes referred to as a CLAT is usually the best option for reducing or eliminating estate and gift taxes on assets passed to your children. It enables you to give a fixed annual amount to Diocese of Trenton for a term of years or for the life of one or more individuals. At the conclusion of the trust’s term, the trust terminates and distributes its remaining assets to the individuals you designate in the original trust document. Your lead trust greatly reduces or eliminates estate and gift taxes on the assets you place in the Trust.
Charitable Lead Unitrust
A charitable lead unitrust, sometimes referred to as a CLUT, will give a variable annual amount to Diocese of Trenton for a term of years or for the life of one or more individuals. At the conclusion of the trust’s term, it distributes its remaining assets to the individuals you designate in the original trust document. Your lead trust greatly reduces or eliminates estate and gift taxes on the assets you place in the trust.
Both the charitable lead unitrust and the charitable lead annuity trust are wonderful tools to help families support the Diocese while protecting intergenerational wealth from gift and estate taxes.
A charitable lead trust is for you if…