Charitable Lead Trust

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    Charitable Lead Trust

    Charitable Lead Trust

    Charitable lead trusts offer ways for Floridians to make gifts to organizations that would benefit during your lifetime and will terminate upon your death or after a specified number of years.  In addition, you can reap significant tax savings by gifting this way, preserve your legacy for years in the future and give back to other residents of Florida.  A charitable lead trust is one type of legal structure designed to help you, your desired charity, and your named beneficiaries make the most of assets you have in your possession.  The skilled estate planning attorneys of Battaglia, Ross, Dicus and McQuaid, P. A., are uniquely positioned to assist you in setting up your charitable enterprise.

    How Does a Charitable Lead Trust Work?

    Essentially, a charitable lead trust accepts the assets you decide to place in it and these investments then pay out their earnings each year to a charity or organization that you designate to receive those payments.  You can decide whether to set up your charitable lead trust to dissolve after a certain period of time, for example 15 or 20 years, or to dissolve upon your death.  After the charitable lead trust dissolves, the property that was formerly held within the trust is then distributed to your beneficiaries.  In this manner, you are able to keep valuable assets within your family and have the added benefit of supporting a cause or institution dear to your heart during your lifetime.

    For instance, if you own appreciable assets such as real estate, cash, securities, jewelry, fine art or other investments you can place them within a charitable lead trust and have the income they generate each year to be gifted to a charity.  There are a few ways to use a charitable lead trust.

    Charitable Lead Annuity Trust

    If you choose the charitable lead annuity trust option, you can save considerable amounts of money in gift taxes.  For example, if you set up your charitable lead trust to expire in 10 years and originally input $1,000,000, with an average assumed growth of 15% per year, you could be gaining a gift tax charitable deduction of $1,000,000.  If your trust paid out 10% each year to the charity, the charity would receive around $100,000 per year.  At the end of the 10 years, the total value of the remaining assets could come close to $2,000,000 which would then be distributed to the beneficiaries you name or your descendants.  Obviously, this is a rudimentary calculation but one that can be especially useful in illustrating the potential savings and benefits for your family members.

    With a charitable lead annuity trust, you have multiple options for how you want to structure it.  You could set it up so that you pay the taxes on any income generated by it, or you could set it up for the charitable lead annuity trust to pay the taxes itself.  If you decide on the former, you would receive an immediate charitable income tax deduction of $1,000,000 but if you choose the latter, the charitable lead trust gets a deduction of about $100,000 per year.

    Charitable Lead Unitrust

    Under the charitable lead unitrust structure, payments to the charity of your choice are not fixed.  You, the donor, will transfer the assets you wish to place in the trust and those assets will be managed by a trustee of your choosing, such as a bank.  That trustee will in turn, invest the assets and each year reevaluate how much the trust is worth.  If the value of the trust increases, the payments to the charity will increase as well.  If the value of the trust decreases, likewise, the payments to the charity will decrease.  In return for donating via this method of a charitable lead trust, you will receive an income tax deduction equal to the promised amount of payments to the charity.  However, under this scheme, the assets you add to the charitable lead trust will be returned to you upon expiration of the trust, in addition to any assets accumulated while the trust was in operation.  As such, it is up to you to pay taxes on this income which is why trustees will often invest the assets in such a way as to earn tax-free income.

    Which Charities Can I Choose From?

    Occasionally, a donor would like to set up a charitable lead trust with us, but doesn’t have a specific charity in mind.  As per the law in the state of Florida, the organization or charity that will receive distributions from your charitable lead trust, must be categorized as “qualified beneficiaries.”

    This means that the charity must be able to receive income from a trust, would still be able to receive trust income or principal once the interests of other beneficiaries to the trust end, and would still be a distribute of trust income upon the termination of the trust on the date selected when the charitable lead trust was set up.

    The part of the process can be a little tricky to determine which charities are eligible to receive your donations.  The state of Florida maintains a list of charities who have already been determined to be eligible and the estate planning attorneys at Battaglia, Ross, Dicus and McQuaid, P.A. would be more than happy to run through the options with you, helping you to ensure your donations are used for the cause that you most support.

    Hire a Qualified Estate Planning Attorney Today!

    While setting up a charitable lead trust can seem complicated, with the right expertise advising you, you can easily navigate the charitable lead trust process and preserve the wealth you have accumulated for your family while also giving back to your community.  The qualified estate planning attorneys at Battaglia, Ross, Dicus and McQuaid, P.A. are here to listen to your concerns and wishes, recommend the best path forward for your situation, and provide unrivaled assistance targeting your needs. Sometimes, the only solution is a bespoke solution, so put our decades of charitable lead trust experience to work for you with a consultation today!

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    Our experienced Estate Planning & Probate Attorneys are available to answer any questions you might have. 

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