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 York Charitable Lead Inter Vivos Unit rust, also known as CLT (Charitable Lead Trust), is a legal and financial tool that allows individuals to make a substantial charitable donation while retaining certain benefits. It is a hybrid trust that combines elements of both a charitable lead trust and a unit rust, offering flexibility and generating income for both charitable organizations and beneficiaries. This trust can be customized to fit the specific needs and goals of the donor, with different types available: 1. Standard New York Charitable Lead Inter Vivos Unit rust: This is the most common type of CLT, where the donor makes a charitable gift during their lifetime. The trust is managed by a trustee who distributes a fixed percentage (usually between 5% and 6%) of the trust's annual value to the designated charitable organizations for a specified period. At the end of this period, any remaining trust assets are passed to non-charitable beneficiaries, such as family members or heirs. 2. Reversible New York Charitable Lead Inter Vivos Unit rust: This type of CLT allows the donor to retain the ability to alter the charitable beneficiaries during the trust's term. It provides the flexibility to change the organizations benefiting from the income generated, ensuring that the donor's charitable interests can evolve over time. 3. Charitable Lead Income New York Charitable Lead Inter Vivos Unit rust: With this format, the donor may choose to distribute only the income generated from the trust's assets to the selected charities, while the principal remains untouched. This option can be advantageous if the donor wants to provide ongoing support to charitable organizations without depleting the trust's corpus. 4. Annuity New York Charitable Lead Inter Vivos Unit rust: In this structure, a fixed dollar amount is paid annually to designated charities, regardless of the trust's investment performance. It provides consistent and predictable income for charitable purposes, making it suitable for donors who want to ensure a specific level of annual support. 5. New York Charitable Lead Inter Vivos Unit rust with a Balloon Payment: This type of trust is structured to distribute predetermined amounts to charities during its term, but culminates with a substantial "balloon payment" to non-charitable beneficiaries at the end. This strategy may be preferred by donors aiming to leave a larger inheritance to specific individuals while supporting charities during their lifetime. New York Charitable Lead Inter Vivos Unit rusts offer significant tax benefits, enabling donors to receive an income tax charitable deduction and potentially reduce estate and gift taxes. It is crucial to consult with legal and financial professionals to determine the most suitable type of CLT based on individual circumstances and philanthropic goals.The New York Charitable Lead Inter Vivos Unit rust, also known as CLT (Charitable Lead Trust), is a legal and financial tool that allows individuals to make a substantial charitable donation while retaining certain benefits. It is a hybrid trust that combines elements of both a charitable lead trust and a unit rust, offering flexibility and generating income for both charitable organizations and beneficiaries. This trust can be customized to fit the specific needs and goals of the donor, with different types available: 1. Standard New York Charitable Lead Inter Vivos Unit rust: This is the most common type of CLT, where the donor makes a charitable gift during their lifetime. The trust is managed by a trustee who distributes a fixed percentage (usually between 5% and 6%) of the trust's annual value to the designated charitable organizations for a specified period. At the end of this period, any remaining trust assets are passed to non-charitable beneficiaries, such as family members or heirs. 2. Reversible New York Charitable Lead Inter Vivos Unit rust: This type of CLT allows the donor to retain the ability to alter the charitable beneficiaries during the trust's term. It provides the flexibility to change the organizations benefiting from the income generated, ensuring that the donor's charitable interests can evolve over time. 3. Charitable Lead Income New York Charitable Lead Inter Vivos Unit rust: With this format, the donor may choose to distribute only the income generated from the trust's assets to the selected charities, while the principal remains untouched. This option can be advantageous if the donor wants to provide ongoing support to charitable organizations without depleting the trust's corpus. 4. Annuity New York Charitable Lead Inter Vivos Unit rust: In this structure, a fixed dollar amount is paid annually to designated charities, regardless of the trust's investment performance. It provides consistent and predictable income for charitable purposes, making it suitable for donors who want to ensure a specific level of annual support. 5. New York Charitable Lead Inter Vivos Unit rust with a Balloon Payment: This type of trust is structured to distribute predetermined amounts to charities during its term, but culminates with a substantial "balloon payment" to non-charitable beneficiaries at the end. This strategy may be preferred by donors aiming to leave a larger inheritance to specific individuals while supporting charities during their lifetime. New York Charitable Lead Inter Vivos Unit rusts offer significant tax benefits, enabling donors to receive an income tax charitable deduction and potentially reduce estate and gift taxes. It is crucial to consult with legal and financial professionals to determine the most suitable type of CLT based on individual circumstances and philanthropic goals.
