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.
Ohio Charitable Lead Inter Vivos Unit rust (CLT) is a legal arrangement that allows individuals to benefit both charitable organizations and their loved ones in Ohio. This irrevocable trust is established during the lifetime of the donor (granter) and is popular among individuals seeking to contribute to causes they care about while also providing for their beneficiaries. The Ohio Charitable Lead Inter Vivos Unit rust operates by transferring assets, such as cash, stocks, or real estate, into the trust. A trustee is appointed to manage these assets and distribute income generated by the trust to charitable organizations specified by the granter. These distributions, known as lead interests, are made either for a fixed term or for the lifetime of the granter. There are two main types of Ohio Charitable Lead Inter Vivos Unit rusts: charitable lead annuity trusts (Class) and charitable lead unit rusts (Clubs). The primary difference between the two lies in the way income distributions are calculated. 1. Charitable Lead Annuity Trust (FLAT): This type of Ohio CLT pays a fixed dollar amount to the designated charities, regardless of the trust's total value or investment performance. The granter specifies the exact amount to be distributed annually, ensuring a steady stream of income for the charitable beneficiaries. 2. Charitable Lead Unit rust (CLUB): Unlike Class, Clubs distribute a variable annual percentage of the trust's fair market value to the charitable organizations. The income distribution is recalculated each year based on the trust's value. If the trust's investments perform well, the charitable beneficiaries may receive larger payouts. Ohio Charitable Lead Inter Vivos Unit rusts offer a range of benefits to the granter, including potential income and estate tax savings. By directing income to charities upfront, the granter can potentially reduce their taxable estate. Furthermore, establishing a CLT allows individuals to support causes that align with their philanthropic goals, leaving a lasting impact on their community. Overall, the Ohio Charitable Lead Inter Vivos Unit rust is an effective estate planning tool for individuals in Ohio looking to maximize both charitable contributions and the financial well-being of their loved ones.
