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 Cook Illinois Charitable Lead Inter Vivos Unit rust is a legal and financial tool used for philanthropic purposes by individuals and organizations in the state of Illinois. It is a type of trust that allows the granter to make charitable donations while still providing for their loved ones. This specific trust arrangement involves the granter transferring assets, such as property, securities, or cash, into the trust. The trust is then set up to make regular payments, also known as lead payments, to one or more chosen charitable organizations for a predetermined period of time. These lead payments can be either a fixed dollar amount or a percentage of the trust's net value and are made annually or at regular intervals. The main purpose of the Cook Illinois Charitable Lead Inter Vivos Unit rust is to provide financial support for charitable causes while minimizing the potential tax burden on the granter's estate. By using this trust structure, the granter can take advantage of certain tax deductions and estate planning benefits provided by the Internal Revenue Service (IRS). There are different types of Cook Illinois Charitable Lead Inter Vivos Unit rusts that can be created, depending on the specific goals and preferences of the granter. These include: 1. Non-Grantor Charitable Lead Trust: In this type of trust, neither the granter nor their loved ones receive any financial benefits during the trust's term. Once the trust period ends, the remaining assets are distributed to the granter's designated beneficiaries, such as family members or friends. 2. Granter Retained Interest Trust (GRIT): With a GRIT, the granter retains some interest or benefit from the trust during its term. This can include receiving regular income payments or retaining the use of certain assets, such as a property. Once the trust period concludes, the remaining assets are passed on to the chosen charitable organizations. 3. Testamentary Charitable Lead Trust: Unlike the previous types, a testamentary Charitable Lead Trust is established through a provision in the granter's will. It only becomes effective upon the granter's death and is funded by assets from their estate. This trust allows the granter to provide ongoing support for charitable causes after their passing while still benefiting their loved ones. Overall, the Cook Illinois Charitable Lead Inter Vivos Unit rust offers a flexible and powerful option for individuals and organizations looking to support charitable causes while optimizing their tax planning and estate distribution strategies. It allows granters to leave a lasting impact on their community by benefiting their preferred charitable organizations while ensuring the financial security of their loved ones.
