In a charitable lead trust, the lifetime payments go to the charity and the remainder returns to the donor or to the donor's estate or other beneficiaries. 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. Unlike a charitable remainder trust, a charitable lead annuity trust creates no income tax deduction to the donor, but the income earned in the trust is not attributed to donor. The trust itself is taxed according to trust rates. The trust receives an income tax deduction for the income paid to charity.
Hawaii Charitable Inter Vivos Lead Annuity Trust, commonly known as Hawaii FLAT, is a unique charitable planning tool that allows individuals to make significant contributions to charitable organizations while enjoying various tax benefits. This type of trust is applicable in the state of Hawaii and offers flexibility and control over charitable donations. A Hawaii Charitable Inter Vivos Lead Annuity Trust is designed to provide income to a designated charitable organization for a predetermined period before passing the remaining assets to non-charitable beneficiaries, such as family members or loved ones. It operates by transferring assets into the trust, which then pays a fixed annuity to the charity during the trust's term. This charitable trust offers several key advantages. Firstly, it enables the donor to support a charitable cause or organization of their choice in Hawaii. Secondly, it allows for potential income and estate tax reduction by utilizing the charitable deduction associated with the donation. Additionally, the assets placed within the trust are protected from creditors, providing asset preservation benefits. There are different types of Hawaii Charitable Inter Vivos Lead Annuity Trusts, each serving specific purposes. Some notable variations include: 1. Hawaii Charitable Inter Vivos Lead Unit rust (CLUB): This type of trust pays a fixed percentage (typically between 5% and 10%) of the trust's annual value to a charitable organization, rather than a fixed annuity amount. It has the potential to increase income payments if the trust's assets appreciate over time. 2. Hawaii Charitable Inter Vivos Lead Net Income Unit rust (CLINT): Unlike CLUB, this type of trust pays the least of the trust's net income or a fixed percentage of the trust's annual value to the designated charity. If the trust's actual net income is higher, it is retained within the trust and distributed to non-charitable beneficiaries at the end of the trust term. 3. Hawaii Charitable Inter Vivos Lead Net Income Unit rust with Makeup (CLNIUT-M): Similar to CLINT, this trust pays the least of net income or a fixed percentage to the charity. However, if the trust's income falls short of the fixed amount in a particular year, the shortfall can be made up in subsequent years. Hawaii Charitable Inter Vivos Lead Annuity Trusts provide a comprehensive framework for philanthropic individuals seeking to leave a lasting impact on their community while simultaneously benefitting from tax advantages and asset protection. Understanding the different variations allows for better customization based on specific charitable goals and financial situations.
