Did you know there is a way to make special charitable gifts to American Diabetes Association using funds that will be returned to you or your loved ones at a future time you choose?
Known as a charitable lead trust, this increasingly popular plan can be used to achieve what might otherwise seem to be conflicting goals, while you also enjoy significant tax savings and other financial benefits.
You may be familiar with charitable gift planning tools that feature annual income for you or others you choose. Under these plans, when income ceases, any remaining funds are transferred to the charity. Under the terms of a charitable lead trust, however, your charitable interests immediately begin to receive gifts in the form of payments from the trust and the gifts continue for the period of time you determine. At the end of that time period, assets remaining in the trust are returned to you or other loved ones you designate.
Gift and estate taxes can be due on amounts over a certain amount given to others during your lifetime or through your estate. Because of the gifts to charity over time from a charitable lead trust, however, you are allowed to reduce the amounts that would otherwise be taxable by the value of those gifts to charity.
Depending on the amount of the payments, how long they last, and other factors, it can be possible to greatly reduce, or even entirely eliminate, gift and estate tax on unlimited amounts ultimately passing to heirs. In addition, at the termination of the trust your heirs can benefit from any growth in trust assets, free of additional gift and estate taxes, during the time the trust is in existence.
As you can see, the charitable lead trust can be an especially attractive way to meet multiple personal and charitable planning goals.
Planning tip: Charitable lead trusts are especially attractive during times when interest rates are low and when assets used to fund them are expected to grow over time.
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