Charitable Lead Trusts

A Charitable Lead Trust is designed to reduce the taxable income of beneficiaries by first donating a portion of the trust’s income to charities and then, after a specific period of time, transferring the remainder of the trust to be beneficiaries.

This type of trust can be beneficial to donors who need a philanthropic and estate planning tool. It is called a lead trust because the charity or charities are entitled to the lead (or first) interest in the trust asset, and the non-charitable beneficiary or beneficiaries receive the remainder (or second-in-line) interest. Handling assets in this way can shelter the assets’ appreciation from estate taxes.

In some cases, gains beyond a certain growth factor of the CLT can pass to heirs tax-free. The rate is adjusted monthly by the IRS, but remains locked in for the length of the trust. There are two types of CLTs: for charitable lead annuity trusts the donor sets a fixed annual gift for named charities; for charitable unitrusts, the charities receive a percentage of the trust’s value each year.

As assets grow, the percentage going to charity can use up more and more money, leaving less for the heirs. For more information about a Gift Annuity Trust, contact Joe Finneran (614) 800-7985 or .

Donor Story — Charitable Lead Trust

CLT Larry and Ellen McKeever, both in their late 50s, own a successful import business and have two sons and a daughter. Both Larry and Ellen were fairly passive pro-life supporters, often including the local pro-life organization in their annual giving.

When their daughter, Meaghan, was found to be unmarried and pregnant at 19, they never hesitated to accept the fact that Meaghan would have to live at home until she completed college and establish a career that would support herself and her new son.

Larry worked hard to build his import business and now has a portfolio worth $800,000. He wants all his children, especially Meaghan, to learn to be self-sufficient adults.

When the McKeevers heard that the local pro-life organization was in desperate need of a larger facility to handle the influx of young women who couldn’t afford abortions in the economic downturn, they saw it as an opportunity to be a major donor now, during theirs and their children’s lifetimes.

With the help of his attorney, Larry and Ellen set up a trust to pay $48,000 a year for 20 years to the pro-life organization — effectively paying the mortgage on the new facility during that time. He received a gift tax deduction of over $700,000 against his assets. The remaining trust assets and all of their growth will pass to his family at zero additional cost in gift and estate taxes. Their children will receive their inheritance, but not for 20 years. Plenty of time for them to make their own way in the world.

The results are that they saved the family significant tax savings and still provided the means to help the cause they care so much about in a very tax-efficient manner. To see if a Charitable Lead Trust is right for you, contact Joe Finneran at (614) 800-7985 or .