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.
Louisiana Charitable Lead Inter Vivos Unit rust (CLT) is a specific type of trust established under the Louisiana Trust Code that allows individuals to donate assets while also providing for charitable causes. This trust instrument combines elements of a charitable lead trust (CLT) and an inter vivos unit rust (VUT). A Charitable Lead Inter Vivos Unit rust in Louisiana serves the purpose of benefiting both charitable organizations and non-charitable beneficiaries. The trust is funded with assets, such as cash, securities, or real estate, which are then managed by a designated trustee. The trustee is responsible for ensuring the smooth administration of the trust according to the terms specified by the granter (the individual establishing the trust). The unique feature of a Charitable Lead Inter Vivos Unit rust is its income distribution process. It operates in a manner that directs a fixed percentage of the trust's net fair market value, revalued annually, to one or more qualified charitable organizations for a specified period, called the lead period. At the end of the lead period, the remaining trust assets, which might have potentially appreciated through investments, are distributed to the non-charitable beneficiaries, typically family members or other designated individuals. There are a few variations of Louisiana Charitable Lead Inter Vivos Unit rusts named based on their specific characteristics: 1. Non-Grantor Charitable Lead Inter Vivos Unit rust: In this type of trust, the granter does not retain control or any interest in the trust assets. The trust assets are excluded from the granter's estate for estate tax purposes. Any income generated goes directly to charitable beneficiaries during the lead period. 2. Granter Charitable Lead Inter Vivos Unit rust: Unlike the non-grantor version, the granter retains certain controls or interests in the trust assets, and the trust's income is imputed to the granter for income tax purposes. This type of trust may provide the granter with potential income tax deductions. 3. Pooled Charitable Lead Inter Vivos Unit rust: This variation allows multiple contributors to pool their assets into a single trust. It is managed by a charitable organization or a trustee and provides an opportunity for smaller contributions to have a more significant combined impact on charitable organizations. 4. Testamentary Charitable Lead Inter Vivos Unit rust: Unlike inter vivos trusts, testamentary trusts are established through a will and only take effect upon the donor's death. This variation allows the granter to provide for charitable giving while ensuring the non-charitable beneficiaries receive the remaining assets after the lead period. Louisiana Charitable Lead Inter Vivos Unit rusts offer numerous benefits, including tax advantages such as potential income tax deductions and estate tax savings. They serve as a powerful tool for both individuals and families to leave a lasting impact on charitable organizations while providing for their loved ones. These trusts require careful consideration and consultation with legal and financial professionals to ensure compliance with the Louisiana Trust Code and to maximize the intended benefits.Louisiana Charitable Lead Inter Vivos Unit rust (CLT) is a specific type of trust established under the Louisiana Trust Code that allows individuals to donate assets while also providing for charitable causes. This trust instrument combines elements of a charitable lead trust (CLT) and an inter vivos unit rust (VUT). A Charitable Lead Inter Vivos Unit rust in Louisiana serves the purpose of benefiting both charitable organizations and non-charitable beneficiaries. The trust is funded with assets, such as cash, securities, or real estate, which are then managed by a designated trustee. The trustee is responsible for ensuring the smooth administration of the trust according to the terms specified by the granter (the individual establishing the trust). The unique feature of a Charitable Lead Inter Vivos Unit rust is its income distribution process. It operates in a manner that directs a fixed percentage of the trust's net fair market value, revalued annually, to one or more qualified charitable organizations for a specified period, called the lead period. At the end of the lead period, the remaining trust assets, which might have potentially appreciated through investments, are distributed to the non-charitable beneficiaries, typically family members or other designated individuals. There are a few variations of Louisiana Charitable Lead Inter Vivos Unit rusts named based on their specific characteristics: 1. Non-Grantor Charitable Lead Inter Vivos Unit rust: In this type of trust, the granter does not retain control or any interest in the trust assets. The trust assets are excluded from the granter's estate for estate tax purposes. Any income generated goes directly to charitable beneficiaries during the lead period. 2. Granter Charitable Lead Inter Vivos Unit rust: Unlike the non-grantor version, the granter retains certain controls or interests in the trust assets, and the trust's income is imputed to the granter for income tax purposes. This type of trust may provide the granter with potential income tax deductions. 3. Pooled Charitable Lead Inter Vivos Unit rust: This variation allows multiple contributors to pool their assets into a single trust. It is managed by a charitable organization or a trustee and provides an opportunity for smaller contributions to have a more significant combined impact on charitable organizations. 4. Testamentary Charitable Lead Inter Vivos Unit rust: Unlike inter vivos trusts, testamentary trusts are established through a will and only take effect upon the donor's death. This variation allows the granter to provide for charitable giving while ensuring the non-charitable beneficiaries receive the remaining assets after the lead period. Louisiana Charitable Lead Inter Vivos Unit rusts offer numerous benefits, including tax advantages such as potential income tax deductions and estate tax savings. They serve as a powerful tool for both individuals and families to leave a lasting impact on charitable organizations while providing for their loved ones. These trusts require careful consideration and consultation with legal and financial professionals to ensure compliance with the Louisiana Trust Code and to maximize the intended benefits.
