A Charitable Lead Trust is a gift arrangement whereby you transfer cash or other property to a trust which pays its income to a qualified charity for a period of years - or a time measured by one or more lives - and which returns the remaining principal to other beneficiaries, usually children or grandchildren at a reduced or eliminated transfer tax.
How does it work?
With the assistance of your attorney, you create an irrevocable trust agreement into which you place cash or other assets. You set the terms of the trust - the length of the trust, the percentage payout from the trust, the charitable income beneficiary and the remainder beneficiary. These terms become irrevocable upon execution of the trust agreement, which in most cases is at death.
For example, Elsa Gardner, a Millsaps alumnus, establishes a charitable lead trust in her will that will receive $1 Million of her estate assets. The trust is to pay Millsaps a 5% fixed payout ($50,000) annually for 15 years. At the end of the 15 year term, the trust is to be divided equally between her three grandchildren.
What are the benefits?
Can this be done while I'm alive?
Yes! When created during your lifetime, you receive a gift tax deduction rather than an estate tax deduction. Furthermore, if you live beyond the term of the trust, you will be able to witness the income benefits that your trust provides to charity as well as the remainder benefit passing to your heirs.
Who manages the trust?
A Trustee must be named to manage the trust assets. This might be a trust company, a financial advisor, trusted individual, or in some cases - you can serve as trustee of your charitable trust. The trustee must ensure that annual tax reporting is completed as well as handle the investment of the trust assets. Millsaps College does not serve as trustee of charitable trusts.
For more information contact:
Gift and Estate Planning Services
P.O. Box 151191
Jackson, MS 39210-1191
(voice) 601-974-1035 (fax) 601-974-1088
DISCLAIMER: The information contained on this page is for educational purposes only. The reader understands that Millsaps College is not rendering legal advice and that the reader should seek independent legal counsel when contemplating estate planning decisions.