A charitable lead trust works in the reverse order of life income gifts. While the assets are in trust, the trust makes payments to Youth Services. When the trust terminates (usually after a pre-determined number of years), the assets are transferred back to you or your heirs, as decided by you.

Lead trusts can be effective estate planning vehicles, because all the appreciation that occurs within the trust during the trust term passes through to the eventual beneficiary (if other than the donor) free of estate and gift taxes.

There are two types of lead trusts: the grantor lead trust and the non-grantor lead trust.

Grantor Lead Trust

As a grantor lead trust donor, you contribute assets to a trust, which makes payments to Youth Services for the duration of the trust. When the trust terminates, the assets usually revert to you and/or your spouse.

When you create a grantor lead trust, you are entitled to an immediate income tax charitable deduction equal to the present value of the income stream that Youth Services will receive during the life of the trust.

You must report on your personal tax return all the taxable income earned by the trust.

As a non-grantor lead trust donor, you contribute assets to a trust, which makes payments to Youth Services for the duration of the trust. When the trust terminates, the assets are transferred to someone other than you or your spouse (usually children or grandchildren).

When you create a non-grantor lead trust, you do not qualify for an income tax charitable deduction, but you also do not have to report any trust income on your personal tax return.

You will, however, enjoy a substantial reduction in estate and gift taxes on the future transfer of assets to your heirs.

Read an example of a Charitable Lead Trusts Profile to see how both you and Youth Services can benefit from a Charitable Lead Trust.