Charitable Lead Trust

If the donor has a sizeable estate, a Charitable Lead Trust may be the best way to pass along his/her estate to heirs and avoid the gift and estate taxes. Similar to a remainder trust, assets are placed into the lead trust and an annual payout rate is established. However, Young Life would receive the annual payout instead of the donor and/or other beneficiaries. At the end of the donor’s lifetime or a specific number of years, the assets in the trust would then be returned to the donor or his/her heirs. This gift lets the donor enjoy both the philanthropic and tax benefits of a charitable gift, without forfeiting the assets, and can help the donor pass along those assets to his/her heirs with a substantially reduced estate and gift tax burden. 
 

Example

The Smiths decide to place the $10 million in assets into a Charitable Lead Trust. They also decide that Young Life is to receive 5% for 25 years. The results are as follows:
  • Provide Young Life with an annual gift of $500,000 or $12.5 million over 25 years.
  • Minimize the estate tax.
  • Minimize the generation skipping tax.
  • Pass along the full $10 million gift to the grandchildren plus the growth on the assets in the trust over and above the 5% paid out to Young Life. 

The Smiths decide to place the $10 million in assets into a Charitable Lead Trust. They also decide that Young Life is to receive 5% for 25 years. The results are as follows:

  • Provide Young Life with an annual gift of $500,000 or $12.5 million over 25 years.
  • Minimize the estate tax.
  • Minimize the generation skipping tax.
  • Pass along the full $10 million gift to the grandchildren plus the growth on the assets in the trust over and above the 5% paid out to Young Life.