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How Can I Benefit from a Charitable Lead Trust?Charitable lead trusts are
designed for people who would like to benefit a charity now rather than later.
You may have heard about some charitable trust strategies before but decided
against them because you wanted to make an immediate gift to charity. With a charitable lead
trust, your gift can have an immediate impact, and you’ll be entitled to other
benefits as well. These trusts will enable you to take advantage of tax benefits
and still make a significant gift. If you are accustomed to
making outright contributions to your favorite charity, or if you typically sell
an investment and give all or a portion of the money to charity, you may be
attracted to the special advantages of using a charitable trust. Avoiding capital gains
taxes on an appreciated asset is a very appealing benefit for investors. It is
also a way for charitable organizations to receive a much larger donation
because they are not required to pay tax on capital gains. Once the trust is
established and the assets are transferred, the trustee can then sell the assets
and reinvest the funds. You also get an immediate
charitable income tax deduction based on the “life expectancy” of your gift.
With a charitable lead trust, you are giving the charity the income from the
asset and not the asset itself. Your deduction will be based on the rate of
return the charity can expect to receive, the duration of the trust, and the IRS
tables used in the calculation. Your write-off will be limited to a portion of
adjusted gross income but can be carried forward to future years. With a charitable lead
trust, the income from the reinvested assets will then go to the charity. The
charity will receive distributions for the duration of the trust. You may
specify a set number of years or the life of you or someone else. At the end of
this period, the asset would revert back to you or your family, for example. A charitable lead trust
may also help reduce family squabbles over inheritance. If you were to actually
gift the asset to the charity upon your death, your heirs may feel somewhat
cheated. By giving income to the charity during your lifetime and having the
asset revert back to your family upon your death, you may avoid much of this
potential controversy. If you are interested in
increasing your gift to a charity and your tax benefits during your lifetime, a
charitable lead trust may enable you to accomplish your goals. By taking the time to plan
your charitable gifts, you may be able to take advantage of some special tax
benefits and make charitable giving a real win-win situation. Keep in mind, however, that you should seek professional advice from an attorney before establishing such a complex trust. © 2003 Emerald Publications
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