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.
Maine Charitable Lead Inter Vivos Unit rust refers to a specific type of trust arrangement that combines both charitable and inter vivos (meaning "during one's lifetime") attributes. This trust is mainly established for philanthropic purposes while allowing individuals to retain control or benefit from the trust assets during their lifetime. In this type of trust, an individual or granteror” transfers assets into the trust, which then pays an income or annuity to a chosen charitable beneficiary for a predetermined period. The Maine Charitable Lead Inter Vivos Unit rust opens doors for individuals to support charitable organizations while potentially enjoying certain tax advantages. By funding this trust, donors can support their chosen charitable causes through annual payments to the designated charitable beneficiary for a specific period. Unlike other types of trusts, the income or annuity paid to the charity is variable and based on a predetermined percentage of the trust's assets, re-evaluated annually. There are multiple types of Maine Charitable Lead Inter Vivos Unit rusts, each with its unique specifications and benefits. Some common variations include: 1. Charitable Lead Annuity Unit rust: This type of trust pays a fixed annuity to the charitable beneficiary, calculated annually based on the initial fair market value of the trust assets. Any appreciation or depreciation of the assets does not change the annuity amount. 2. Charitable Lead Unit rust: In this variant, the annual payment to the charitable beneficiary is calculated based on a fixed percentage (typically between 5% to 7%) of the trust's net assets, which are revalued annually. Unlike the annuity unit rust, this type allows for potential growth in the annuity payment if the trust assets appreciate over time. 3. Charitable Lead Net Income Unit rust: The payments to the charitable beneficiary under this trust are determined based on the trust's net income for the year. It allows for more flexibility as the annual payment fluctuates depending on the trust's performance. 4. Charitable Lead Unit rust with Makeup Provision: In this type of trust, if the annual distribution to the charitable beneficiary falls short in any given year (due to poor performance of trust investments), the trust can make up for the deficit in future years when the trust's income improves. These are some main types of Maine Charitable Lead Inter Vivos Unit rusts available to individuals seeking to contribute towards charitable causes while maintaining some level of control or benefiting from the trust assets during their lifetime. It is advisable to consult with a qualified estate planning attorney or financial advisor to understand which type of trust suits individual objectives and circumstances best.
