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.
Wisconsin Charitable Lead Inter Vivos Unit rust (CLT) is a specialized trust arrangement designed to provide a means for individuals to support charitable causes while retaining control over their assets during their lifetime. This type of trust combines elements of charitable giving with inter vivos (meaning "between the living") trusts. A Wisconsin Charitable Lead Inter Vivos Unit rust allows the donor, known as the settler, to transfer assets, such as cash, securities, or real estate, into the trust. The trust is then managed by a trustee, who is responsible for investing the assets and making distributions according to the terms of the trust agreement. The primary purpose of a Wisconsin Charitable Lead Inter Vivos Unit rust is to benefit charitable organizations or causes selected by the settler. The trust provides an annual payment, known as the lead interest, to the designated charity(IES) for a fixed term or until the settler's death. After the lead interest period ends, the remaining assets in the trust pass to non-charitable beneficiaries, typically the settler's family members or other chosen individuals. This unique charitable giving tool offers several benefits. First, it allows the settler to support charitable organizations they care about during their lifetime, ensuring their philanthropic goals are fulfilled. Second, it provides potential tax advantages as contributions to the trust may be eligible for income, gift, or estate tax deductions. Third, it allows the settler to retain control and benefit from the trust assets' income and appreciation during the lead interest period. In Wisconsin, there are different types of Charitable Lead Inter Vivos Unit rusts, each with its own characteristics, which can be tailored to meet the settler's specific goals. Some common variations include: 1. Charitable Lead Annuity Trust (FLAT): This type of trust pays a fixed dollar amount, often a percentage of the initial trust value, to the designated charity(IES) each year. The distributions do not fluctuate based on the trust's investment performance. 2. Charitable Lead Unit rust (CLUB): Unlike Class, this type of trust distributes a fixed percentage, typically between 5% and 8%, of the trust's annual value to the charity(IES) each year. As the trust's value changes, so do the annual payments. 3. Flip Unit rust: This type of trust starts as a traditional unit rust, paying a fixed percentage to the charity(IES) during the lead interest period. Once a specified event occurs, such as the sale of a property or the occurrence of a specific date, the trust "flips" to become a different type of trust, often a charitable remainder trust, benefitting non-charitable beneficiaries. 4. Net Income Unit rust: Instead of distributing a fixed percentage, a net income unit rust provides for the payment of the least of the net income earned by the trust or a fixed percentage to the charitable organization(s). Any undistributed income is carried forward to future years. The Wisconsin Charitable Lead Inter Vivos Unit rust provides an effective way for individuals to support charitable causes while maintaining control and financial benefits during their lifetime. The different types of trust structures allow for flexibility in meeting the settler's specific goals. Consultation with legal and financial professionals is recommended to determine the most suitable trust structure based on individual circumstances.Wisconsin Charitable Lead Inter Vivos Unit rust (CLT) is a specialized trust arrangement designed to provide a means for individuals to support charitable causes while retaining control over their assets during their lifetime. This type of trust combines elements of charitable giving with inter vivos (meaning "between the living") trusts. A Wisconsin Charitable Lead Inter Vivos Unit rust allows the donor, known as the settler, to transfer assets, such as cash, securities, or real estate, into the trust. The trust is then managed by a trustee, who is responsible for investing the assets and making distributions according to the terms of the trust agreement. The primary purpose of a Wisconsin Charitable Lead Inter Vivos Unit rust is to benefit charitable organizations or causes selected by the settler. The trust provides an annual payment, known as the lead interest, to the designated charity(IES) for a fixed term or until the settler's death. After the lead interest period ends, the remaining assets in the trust pass to non-charitable beneficiaries, typically the settler's family members or other chosen individuals. This unique charitable giving tool offers several benefits. First, it allows the settler to support charitable organizations they care about during their lifetime, ensuring their philanthropic goals are fulfilled. Second, it provides potential tax advantages as contributions to the trust may be eligible for income, gift, or estate tax deductions. Third, it allows the settler to retain control and benefit from the trust assets' income and appreciation during the lead interest period. In Wisconsin, there are different types of Charitable Lead Inter Vivos Unit rusts, each with its own characteristics, which can be tailored to meet the settler's specific goals. Some common variations include: 1. Charitable Lead Annuity Trust (FLAT): This type of trust pays a fixed dollar amount, often a percentage of the initial trust value, to the designated charity(IES) each year. The distributions do not fluctuate based on the trust's investment performance. 2. Charitable Lead Unit rust (CLUB): Unlike Class, this type of trust distributes a fixed percentage, typically between 5% and 8%, of the trust's annual value to the charity(IES) each year. As the trust's value changes, so do the annual payments. 3. Flip Unit rust: This type of trust starts as a traditional unit rust, paying a fixed percentage to the charity(IES) during the lead interest period. Once a specified event occurs, such as the sale of a property or the occurrence of a specific date, the trust "flips" to become a different type of trust, often a charitable remainder trust, benefitting non-charitable beneficiaries. 4. Net Income Unit rust: Instead of distributing a fixed percentage, a net income unit rust provides for the payment of the least of the net income earned by the trust or a fixed percentage to the charitable organization(s). Any undistributed income is carried forward to future years. The Wisconsin Charitable Lead Inter Vivos Unit rust provides an effective way for individuals to support charitable causes while maintaining control and financial benefits during their lifetime. The different types of trust structures allow for flexibility in meeting the settler's specific goals. Consultation with legal and financial professionals is recommended to determine the most suitable trust structure based on individual circumstances.
