You contribute securities or other appreciating assets to a Charitable Lead Trust with the suggested minimum gift requirement being $1,000,000. The trust makes annual payments to witf for a set period of time. When the trust terminates, the remaining principal is paid to your heirs.
When I set up my CLT, will I be able to claim an income tax deduction?
You can, but you might not want to do that. 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 witf and to pass trust appreciation to your family free of gift and estate tax. Contact witf for information that will help you decide which type of CLT will work better for you.
Can I name my grandchildren as beneficiaries of my CLT?
Yes, you can 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, more 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.
How long will my CLT last?
There is no minimum or maximum term for your Charitable Lead Trust under federal law. Applicable state law may require a trust to end eventually (typically after several decades). If you want to maximize the benefit to witf 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 witf .
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