A charitable lead trust (also known at a CLUT) is a gift plan that allows you to transfer assets to family members at a reduced tax cost while making a generous gift of current income to PC. The main goals of a lead trust are to preserve assets, enable a donor to make a current gift to PC, and reduce future taxes on your estate. As a lead trust donor, you irrevocably transfer assets, usually cash or securities, to a trustee of your choice. Each year, the trustee pays a fixed percentage of the trust’s current value, as revalued annually, to PC. If the trust’s value increases from one year to the next, the annual payment to PC increases proportionately. Likewise, if the trust’s value goes down, the amount it pays out is reduced.
The lead trust’s term may be for a specific number of years. Payments are made out of trust income or trust principal if the trust income is not adequate. If trust income exceeds the charitable payment in a given year, the trust pays income tax on the excess.
When the lead trust’s term ends, the trust distributes all of its accumulated assets to you, family members, or other beneficiaries named by you. If the assets are to be returned to you, you receive an income tax deduction when the trust is created. If the assets are passed on to family members or other beneficiaries, estate or gift taxes on the value of the gift can be reduced or eliminated.
There are several benefits for you:
1. A portion of the gift will qualify for a federal gift tax charitable deduction.
2. Presbyterian College will receive annual payments from your trust for a term of years.
3. The beneficiaries of your trust will receive all of the trust’s assets when the trust terminates. Any asset growth that occurs within the trust during the term of the trust will be distributed to your trust’s beneficiaries free of gift or estate tax.
4. You will provide generous support to Presbyterian College.
*As with any financial decision, you should consult your CPA, attorney and other financial advisors.
For more information, please contact:
Ann Casey – Director of Advancement Services
Office: 864.833.8007 | firstname.lastname@example.org