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.
A West Virginia Charitable Lead Inter Vivos Unit rust, also known as WV CLT, is a legal arrangement that combines both charitable giving and estate planning. It is a type of trust established during the lifetime of the donor (inter vivos), where income is distributed to charitable organizations for a specified period or until the donor's death. The West Virginia Charitable Lead Inter Vivos Unit rust offers several benefits for individuals looking to support charitable causes while maintaining control over their assets. By creating this trust, donors can enjoy potential tax advantages, secure assets for their beneficiaries, and support the causes they care about. There are different types of West Virginia Charitable Lead Inter Vivos Unit rust that donors can establish based on their specific goals and circumstances. Some of them include: 1. Term CLT: This type of WV CLT distributes income to designated charitable organizations for a fixed period chosen by the donor. After the specified period, the remaining assets are passed on to the donor's non-charitable beneficiaries. 2. Flip CLT: A Flip CLT starts as a charitable lead trust, where income is distributed to charitable organizations for a predetermined period or until the donor's death. Once a specified event, often related to taxation, occurs (e.g., the sale of a particular asset), the trust "flips" into a different trust structure, such as a Charitable Remainder Unit rust, with income going to non-charitable beneficiaries. 3. Pooled Income CLT: In this type of WV CLT, multiple donors' assets are pooled together into a single trust. The income generated is then distributed to both charitable and non-charitable beneficiaries based on their respective interests. 4. Granter CLT: In a Granter CLT, the donor retains certain income tax benefits while the trust is active. The income generated by the trust is taxed to the donor, allowing the donor to claim charitable deductions. 5. Non-Grantor CLT: Unlike a Granter CLT, a Non-Grantor CLT is taxed as a separate entity, which allows for potential tax savings and increased charitable deductions. When establishing a West Virginia Charitable Lead Inter Vivos Unit rust, it is essential to work closely with an experienced estate planning attorney or financial advisor to ensure the trust is tailored to meet the donor's objectives and complies with relevant state laws.
