Charitable Lead Trusts

Donor Benefits:

• Gift returned to the donor or heirs at reduced tax cost
• Satisfaction of giving cash donations during lifetime

This gift option is the opposite of an annuity or remainder trust – you give assets and retain a life income. In establishing a charitable lead trust, you (the grantor) place assets in a trust. The initial or “lead” interest is paid out to Patronato annually, for either a predetermined number of years or for the duration of your life. Thereafter, the assets of the lead trust are either returned to you or passed on to your children, grandchildren, or other loved ones.

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 heirs, applicable estate or gift taxes on the value of the gift are reduced or eliminated.

A charitable lead trust may provide either a fixed “annuity” payment or a variable “unitrust” payment. Low interest rates make the annuity payment option attractive for donors as more assets may be passed on to heirs.

The charitable lead trust gift is used primarily by wealthy individuals for whom the absence of the income isn’t a problem. The principal benefit to the donor from a charitable lead trust is that it allows property to be transferred to the eventual beneficiaries at a reduced tax cost. It is particularly attractive for property in which there is a good potential for high appreciation.