Charitable Lead Trust
How it Works
- You contribute securities or other appreciated assets to a charitable lead trust.
- The trust makes fixed annual payments to Exeter for a period of time.
- When the trust terminates, the remaining principal is paid to your heirs.
- Income payments to us for a term reduce the ultimate tax cost of transferring an asset to your heirs.
- The amount and term of the payments to Exeter can be set so as to reduce or even eliminate transfer taxes due when the principal reverts to your heirs.
- All appreciation that takes place in the trust goes tax-free to the individuals named in your trust.
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Please contact us so that we can assist you through every step of the process.
Questions and Answers
Maybe. If the trust is structured a certain way, youíll 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 (subject to deductions for payments made to Exeter). Most donors structure their CLTs in a way that does not yield a current income tax deduction so that they donít have to worry about income tax issues in the future. In both cases, you are able to provide wonderful support to Exeter and to pass trust appreciation to your family free of gift and estate tax. We can provide you and your advisors with information that will help you decide which type of CLT will work better for you.
Yes, you may 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 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.
There is no minimum or maximum term for your charitable lead trust. However, if you want to maximize the benefit to Exeter 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 Exeter.