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 Vermont Charitable Lead Inter Vivos Unit rust is a type of trust established in the state of Vermont that allows individuals to provide financial support to charitable organizations during their lifetime, while ultimately passing on assets to their chosen beneficiaries. This trust combines features of both a charitable lead trust and a unit rust, offering flexibility and tax advantages to the creator. In a Vermont Charitable Lead Inter Vivos Unit rust, the creator, also known as the granter, designates a charitable organization as the income beneficiary of the trust. This means that the charity receives regular payments or distributions from the trust for a specified term, typically a fixed number of years or the lifetime of the granter. The payments to the charity are either a fixed percentage (unit rust interest) of the net fair market value of the trust's assets, revalued annually, or a fixed dollar amount (annuity interest). There are different types of Vermont Charitable Lead Inter Vivos Unit rust that granters can choose from, based on their specific goals and preferences. These variations include: 1. Non-Flip Unit rust: In this type of unit rust, the charitable organization receives a fixed percentage or fixed dollar amount of the trust's fair market value each year, regardless of changes in the trust's value. The remaining income, if any, is allocated to the non-charitable beneficiaries. 2. Flip Unit rust: This unit rust provides for a change in the distribution percentage or amount when a triggering event occurs, such as the sale of a specific asset or the occurrence of a specified date. This allows the trust to initially provide a higher percentage or amount to the non-charitable beneficiaries and then flip to a lower percentage or amount for the remaining term, benefiting the charitable organization. 3. Sale and Unit rust: This variation allows the granter to sell highly appreciated assets to the trust, receiving both an income tax charitable deduction and a regular stream of payments for a specific term. Upon termination, the remaining assets are distributed to the non-charitable beneficiaries. 4. Net Income Unit rust with Makeup Charitable Remainder Trust (TIMEOUT): Under this form, the trust provides an income stream to the charitable organization, determined annually as a percentage of the trust's net fair market value. If the trust's net income in any year is less than the stated unit rust percentage, the shortfall is made up in later years when the trust has excess income. Vermont Charitable Lead Inter Vivos Unit rusts offer several benefits, including potential estate and gift tax deductions, reducing the taxable impact of transferring assets to beneficiaries, and the ability to support charitable causes during the granter's lifetime. It is essential to consult with legal and financial professionals experienced in estate planning to determine the best approach and type of unit rust suited to individual circumstances.The Vermont Charitable Lead Inter Vivos Unit rust is a type of trust established in the state of Vermont that allows individuals to provide financial support to charitable organizations during their lifetime, while ultimately passing on assets to their chosen beneficiaries. This trust combines features of both a charitable lead trust and a unit rust, offering flexibility and tax advantages to the creator. In a Vermont Charitable Lead Inter Vivos Unit rust, the creator, also known as the granter, designates a charitable organization as the income beneficiary of the trust. This means that the charity receives regular payments or distributions from the trust for a specified term, typically a fixed number of years or the lifetime of the granter. The payments to the charity are either a fixed percentage (unit rust interest) of the net fair market value of the trust's assets, revalued annually, or a fixed dollar amount (annuity interest). There are different types of Vermont Charitable Lead Inter Vivos Unit rust that granters can choose from, based on their specific goals and preferences. These variations include: 1. Non-Flip Unit rust: In this type of unit rust, the charitable organization receives a fixed percentage or fixed dollar amount of the trust's fair market value each year, regardless of changes in the trust's value. The remaining income, if any, is allocated to the non-charitable beneficiaries. 2. Flip Unit rust: This unit rust provides for a change in the distribution percentage or amount when a triggering event occurs, such as the sale of a specific asset or the occurrence of a specified date. This allows the trust to initially provide a higher percentage or amount to the non-charitable beneficiaries and then flip to a lower percentage or amount for the remaining term, benefiting the charitable organization. 3. Sale and Unit rust: This variation allows the granter to sell highly appreciated assets to the trust, receiving both an income tax charitable deduction and a regular stream of payments for a specific term. Upon termination, the remaining assets are distributed to the non-charitable beneficiaries. 4. Net Income Unit rust with Makeup Charitable Remainder Trust (TIMEOUT): Under this form, the trust provides an income stream to the charitable organization, determined annually as a percentage of the trust's net fair market value. If the trust's net income in any year is less than the stated unit rust percentage, the shortfall is made up in later years when the trust has excess income. Vermont Charitable Lead Inter Vivos Unit rusts offer several benefits, including potential estate and gift tax deductions, reducing the taxable impact of transferring assets to beneficiaries, and the ability to support charitable causes during the granter's lifetime. It is essential to consult with legal and financial professionals experienced in estate planning to determine the best approach and type of unit rust suited to individual circumstances.
