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.
The New Mexico Charitable Lead Inter Vivos Unit rust (CLT) is a legal and financial tool that allows individuals to support charitable causes while also providing financial benefits and flexibility. This trust is a popular option for individuals who wish to make a significant impact on their community and minimize estate tax liabilities. It allows the donor to establish a trust during their lifetime, called the inter vivos trust, which provides income to one or more charitable organizations for a specified period. The New Mexico Charitable Lead Inter Vivos Unit rust offers several options to suit different charitable and financial objectives. These options include: 1. Charitable Lead Annuity Trust (FLAT): A FLAT is a type of charitable lead trust where the trust pays a fixed annuity amount to the charitable organization(s) for a set number of years. This option is suitable for individuals who want to lock in a set donation amount annually to the charity. 2. Charitable Lead Unit rust (CLUB): A CLUB is a type of charitable lead trust where the trust pays a fixed percentage of the net fair market value of the trust assets valued annually to the charitable organization(s) for a set number of years. This option is ideal for individuals who wish to provide a flexible donation amount based on the trust's performance. 3. Flip CLUB: A Flip CLUB is a variation of the CLUB, where the trust starts as a non-income producing asset, often real estate. After a triggering event, typically the sale of the asset, it converts into a traditional CLUB. This option is suitable for individuals who want to maximize their charitable contribution while retaining ownership of an income-generating asset. 4. Granter Retained Income Trust (GRIT): A GRIT is a type of charitable lead trust where the donor retains an income interest in the trust for a set period, after which the remaining assets are distributed to the charitable organization(s). This option is beneficial for individuals who want to generate income from the trust during their lifetime while supporting a charitable cause. By establishing a New Mexico Charitable Lead Inter Vivos Unit rust, individuals can create a lasting philanthropic legacy and enjoy certain financial advantages, including reduced estate tax liability and potential income tax deductions. It is crucial to consult with a qualified estate planning attorney or financial advisor to determine the most suitable type of CLT for personal circumstances and charitable goals.The New Mexico Charitable Lead Inter Vivos Unit rust (CLT) is a legal and financial tool that allows individuals to support charitable causes while also providing financial benefits and flexibility. This trust is a popular option for individuals who wish to make a significant impact on their community and minimize estate tax liabilities. It allows the donor to establish a trust during their lifetime, called the inter vivos trust, which provides income to one or more charitable organizations for a specified period. The New Mexico Charitable Lead Inter Vivos Unit rust offers several options to suit different charitable and financial objectives. These options include: 1. Charitable Lead Annuity Trust (FLAT): A FLAT is a type of charitable lead trust where the trust pays a fixed annuity amount to the charitable organization(s) for a set number of years. This option is suitable for individuals who want to lock in a set donation amount annually to the charity. 2. Charitable Lead Unit rust (CLUB): A CLUB is a type of charitable lead trust where the trust pays a fixed percentage of the net fair market value of the trust assets valued annually to the charitable organization(s) for a set number of years. This option is ideal for individuals who wish to provide a flexible donation amount based on the trust's performance. 3. Flip CLUB: A Flip CLUB is a variation of the CLUB, where the trust starts as a non-income producing asset, often real estate. After a triggering event, typically the sale of the asset, it converts into a traditional CLUB. This option is suitable for individuals who want to maximize their charitable contribution while retaining ownership of an income-generating asset. 4. Granter Retained Income Trust (GRIT): A GRIT is a type of charitable lead trust where the donor retains an income interest in the trust for a set period, after which the remaining assets are distributed to the charitable organization(s). This option is beneficial for individuals who want to generate income from the trust during their lifetime while supporting a charitable cause. By establishing a New Mexico Charitable Lead Inter Vivos Unit rust, individuals can create a lasting philanthropic legacy and enjoy certain financial advantages, including reduced estate tax liability and potential income tax deductions. It is crucial to consult with a qualified estate planning attorney or financial advisor to determine the most suitable type of CLT for personal circumstances and charitable goals.
