In a charitable lead trust, a donor transfers property to the lead trust, which pays a percentage of the value of the trust assets, usually for a term of years, to the charity. At the end of the trust term, the remaining assets in the trust and any growth it has realized are passed to donor's heirs. Although there is no income tax deduction when the donor creates a charitable lead trust, his/her gift or estate tax is greatly discounted and any growth is passed to his/her heirs gift and estate tax free.
In a charitable lead unitrust, a donor irrevocably transfers cash, closely held securities or other valuable property to a trustee who, during the unitrusts term, invests the unitrust's assets. Each year, the trustee distributes a fixed percentage of the unitrust's net asset value, as calculated annually, to a named charity. These payments are made out of trust income (or trust principal if the trust income is not adequate) and are tax deductible as a charitable contribution for the year in which they are made. If, however, trust income exceeds the charitable payment for a given year, the trust pays income tax on the excess.
When the lead unitrust term ends, the unitrust distributes the remainder of its accumulated assets to a non-charitable remainderman, usually family members or other beneficiaries named by the donor. That amount is subject to federal gift tax based on the current fair market value of the gift at the time the trust is established. Gift tax is paid on the remainder interest as calculated from the current fair market value of the asset at the time the trust is established; generally this amount is much less than the estate tax would be on the asset as calculated at the time it is inherited.
Alabama Charitable Lead Inter Vivos Unit rust (CLIT) is a legal entity established in the state of Alabama for charitable purposes. It operates as a type of trust that allows individuals to make charitable donations while still retaining certain rights and benefits during their lifetime. This trust is designed to provide financial support to charitable organizations by distributing a portion of its income or assets to the designated charity for a specific period. The income generated by the trust assets is paid to the charitable beneficiary, known as the "lead" beneficiary, for a predetermined period, which is determined at the time of setting up the trust. There are several types of Alabama Charitable Lead Inter Vivos Unit rust, each with its own unique features and benefits: 1. Non-Grantor CLIT: Under this type of trust, the donor (also known as the "granter") transfers assets into the trust, but does not retain any control or receive any income during their lifetime. The charitable organization receives regular payments from the trust during the predetermined period. 2. Granter CLIT: In this variation, the donor retains certain control or benefits during their lifetime, such as receiving income from the trust. However, after the donor's death or a specified period, the remaining assets in the trust are transferred to the charitable organization. 3. Charitable Lead Annuity Trust (FLAT): This type of Alabama CLIT pays a fixed amount to the charitable beneficiary each year, regardless of the trust's income. This ensures a predictable income stream for the charity. 4. Charitable Lead Unit rust (CLUB): Unlike FLAT, this variation pays a fixed percentage of the trust's value (revalued annually) to the charitable beneficiary. As the trust assets grow, the payment to the charity increases, allowing for potential inflation protection. Regardless of the type of Alabama Charitable Lead Inter Vivos Unit rust, these trusts offer several advantages. They allow individuals to support charitable causes while potentially reducing their overall estate and gift taxes. Additionally, they provide flexibility in structuring donations and can be tailored to meet individual financial goals and charitable objectives. It is advisable to consult with an experienced attorney or financial advisor specializing in estate planning and philanthropy to determine the most suitable Alabama Charitable Lead Inter Vivos Unit rust structure based on individual circumstances and goals.Alabama Charitable Lead Inter Vivos Unit rust (CLIT) is a legal entity established in the state of Alabama for charitable purposes. It operates as a type of trust that allows individuals to make charitable donations while still retaining certain rights and benefits during their lifetime. This trust is designed to provide financial support to charitable organizations by distributing a portion of its income or assets to the designated charity for a specific period. The income generated by the trust assets is paid to the charitable beneficiary, known as the "lead" beneficiary, for a predetermined period, which is determined at the time of setting up the trust. There are several types of Alabama Charitable Lead Inter Vivos Unit rust, each with its own unique features and benefits: 1. Non-Grantor CLIT: Under this type of trust, the donor (also known as the "granter") transfers assets into the trust, but does not retain any control or receive any income during their lifetime. The charitable organization receives regular payments from the trust during the predetermined period. 2. Granter CLIT: In this variation, the donor retains certain control or benefits during their lifetime, such as receiving income from the trust. However, after the donor's death or a specified period, the remaining assets in the trust are transferred to the charitable organization. 3. Charitable Lead Annuity Trust (FLAT): This type of Alabama CLIT pays a fixed amount to the charitable beneficiary each year, regardless of the trust's income. This ensures a predictable income stream for the charity. 4. Charitable Lead Unit rust (CLUB): Unlike FLAT, this variation pays a fixed percentage of the trust's value (revalued annually) to the charitable beneficiary. As the trust assets grow, the payment to the charity increases, allowing for potential inflation protection. Regardless of the type of Alabama Charitable Lead Inter Vivos Unit rust, these trusts offer several advantages. They allow individuals to support charitable causes while potentially reducing their overall estate and gift taxes. Additionally, they provide flexibility in structuring donations and can be tailored to meet individual financial goals and charitable objectives. It is advisable to consult with an experienced attorney or financial advisor specializing in estate planning and philanthropy to determine the most suitable Alabama Charitable Lead Inter Vivos Unit rust structure based on individual circumstances and goals.
