Do you want to benefit from the tax savings that result from supporting the Anne Carlsen Center yet you don’t want to give up any assets that you’d like your family to receive someday? A charitable lead trust works for Anne Carlsen Center supporters who would like to support our work and protect their family’s inheritance as well.
As a donor, you give assets to a trust that pays the Anne Carlsen Center an income for a number of years, which you choose. The longer the length of time, the better the gift tax savings for you. When the term is up, the remaining trust assets go to your family and other beneficiaries you select.
A charitable lead trust can make payments in one of two ways: A charitable lead annuity trust pays a fixed amount each year to the Anne Carlsen Center, whereas a charitable lead unitrust (the less common type) pays a variable amount each year based on the value of the assets in the trust. With a unitrust, if the trust’s assets go up in value, the payments to our organization go up as well. On the other hand, if the assets decrease in value, so do our payments.
This is an excellent way to transfer property to family members down the line (typically children and grandchildren) at a minimal tax cost. This type of charitable lead trust (also called a nongrantor, or family lead, trust) is especially appealing to Anne Carlsen Center supporters who are financially comfortable enough that they can forgo investment income on some assets.
Given the complex nature of this gift, please refer to our helpful definitions page to help guide you though the terminology referenced. To go directly to the helpful definitions click here
Profile of a Giver of this Gift
If these statements resonate with you, contact your estate planning attorney to further look into the benefits of charitable lead trusts, or contact The Foundation with further questions.
- You’d like to provide the Anne Carlsen Center with ongoing support over a certain period of years.
- You want to ultimately transfer property to loved ones at minimal tax cost.
- You are able to temporarily forgo access to an asset, with your heirs receiving the asset later on.
- You could benefit from estate or gift tax relief.
- You want to act on this giving opportunity now, while interest rates are low and it’s a tax-efficient time to implement this strategy into your estate plans.
Is this Gift Right for You?
The charitable midterm federal rate (the interest rate used in calculating the amount of the gift subject to tax) is the lowest it has been in years meaning a higher tax savings for funding a charitable lead trust. The best gift tax breaks, combined with assets that may be depressed in value temporarily, create the perfect opportunity to consider a lead trust.
Benefits of this Gift
- You support an organization you love while also making sure your family is taken care of after your lifetime.
- The gift qualifies for gift or estate tax savings based on the current value of the income paid to the Anne Carlsen Center over the trust term.
How to Make this Gift
The tax savings is in the form of gift-estate taxes, not income taxes. So this strategy may be right for you if you’re in a situation where your wealth would most likely be subject to estate taxes at your death. Creating a charitable lead trust can provide you with significant tax relief while providing us with financial support. The charitable lead trust is especially attractive to Anne Carlsen Center supporters when interest rates are low, because of the increased tax benefits. Consult your legal and tax advisors for more information about your possible tax savings.
If you’re interested in using a charitable lead trust to benefit your family and the Anne Carlsen Center, the following steps will guide you through the process of setting up this arrangement.
1. Meet with your estate planning attorney.
A charitable lead trust is one of the more complex giving arrangements, and your attorney can help you create the trust in a way that best meets your needs. Some things you’ll need to consider are:
- Which assets to donate.
- How much to donate.
- Which charities you’d like to receive payments.
- What rate to pay the charities and for how long.
- Whether you should set up a lifetime trust now (with the charities starting to receive trust payments today) or as a testamentary trust at death (with the charities starting to receive payments after your lifetime.
2. With your attorney’s help, set up the trust.
The process will depend on whether you choose a lifetime trust or a testamentary trust.
For a lifetime charitable lead trust:
Your attorney will draft the trust and assist you with the process of funding the trust. You’ll fund the trust with assets you know you won’t need in the future, but that you want your loved ones to ultimately receive. You will receive a partial gift tax charitable deduction, and the rest of the gift is taxable and subject to gift taxes.
For a testamentary charitable lead trust:
Your attorney will draft the trust as part of your will. After your lifetime, your estate will receive a partial estate tax charitable deduction, and the rest of the gift is taxable and subject to estate tax.
For More Information
We understand these gifts are complicated, that’s why we would be happy to work with you and your advisors to discuss a potential gift that meets your financial goals while also supporting our mission. You are not alone in making these life-impacting decisions. Please contact the Anne Carlsen Center Foundation at 1-800-568-5175 to help you answer any questions you may have or to futher discuss your giving options.
For Additional Resource Information Click Here
The information on this website is not intended as legal or tax advice. For legal or tax advice, please consult an attorney. References to estate and income taxes apply to federal taxes only. State income/estate taxes or state law may impact your results.