Ways to Give - Charitable Lead Trusts
There
is a way to make a charitable gift using funds that would
eventually be returned to you or your loved ones. A charitable
lead trust can provide significant charitable and tax benefits.
This form of trust can be a means to transfer substantial amounts
of wealth to your family while reducing or eliminating gift and
estate tax. During the term of the trust, income is paid to the
University of Maine Foundation to fund an endowment or support the
program of your choice. When the trust terminates, the assets
revert to the donor or another beneficiary but the appreciation is
not subject to further gift or estate tax.
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Example:
Frank's goal was to leave $500,000 to his daughter. He was
surprised to learn that it could require a gift from his estate
of up to $1 million or more for her to realize $500,000 after
payment of federal and possibly state estate taxes. After
considering a number of options, he decided to use $500,000 to
create a charitable lead trust that will pay a fixed amount of
7% or $35,000 for 20 years to the University of Maine
Foundation. He chose the time period and payout rate at the time
he established the trust. The charitable gifts from this plan
will total $700,000, substantially more than the amount
originally placed in trust. At the end of 20 years, the
remaining assets in the lead trust will go to his daughter.
A charitable lead trust is a valuable gift and
estate-planning tool. If you want to reduce your current income
but wish to retain assets for your family, provide much needed
support for the University of Maine, and reduce your gift and
estate tax exposure, call your tax advisor to discuss the benefits
of establishing a charitable lead trust.
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