Charitable Lead Trust

If you are looking for a way to pass assets to your family while reducing or eliminating gift or estate taxes, a charitable lead trust may be an excellent option. We work with you and your legal and tax advisors to help fulfill your charitable goals while providing maximum tax benefits.

How A Charitable Lead Trust Works

1. Contribute property to fund a trust. The annual disbursement goes into your fund at the Community Foundation for a number of years. You can make grants to nonprofit organizations from this fund.
2. Receive a gift or estate tax deduction at the time of your gift.
3. After a period of time, your family receives the trust assets plus any additional growth in value.

Zero Tax Plan

It is possible to set up a lead trust that will allow you to pass assets to your family with zero transfer taxes. The IRS assumes that a lead trust is only earning at the current low federal rate. If the investments of the trust produce a higher return than the payments made to the Community Foundation over the term of the trust, the full value of the trust may be transferred to family with zero gift tax.

FLP/Lead Trust Plan

To discount your gift to family even more, you may consider first transferring your real estate or other assets into a family limited partnership (FLP), which will fund your lead trust. The combination of the FLP, the lead trust, and a gift exemption can permit the lead trust to pay income to your fund for a number of years and transfer substantial potentially assets tax-free to your family.

Increasing Payment Lead Trust

With increased volatility in the stock market, you may want to consider creating a lead trust that makes fixed payments of increasing amounts to your fund at the Community Foundation over time. Because the payments are fixed, your family ultimately benefits from any growth in the trust. Low payouts in early years allow the trust to grow, providing protection should the economy produce below-average returns in the future.

Email President Bob Fockler or call him at (901) 722-0045 if you are considering a charitable lead trust.