Here is a fictitious example for you to consider. Marci and Mark Matthews would like to make a significant gift to Youth Services and give their children some of their wealth while they are living. Because the Matthews' estate is worth over $2 million, they are concerned about the high federal estate tax (currently 39% for their tax bracket), which would reduce the assets that pass on to their family through their will. Though the Tax Relief Act of 2001 calls for estate taxes to decrease until 2010 when all estate taxes are to be repealed, unless the Act is voted back in by Congress in 2011, the provision "sunsets," and estate taxes are back in effect. In this climate of uncertainty, the Matthews decide to plan for the possibility that the estate tax will come back into effect.

After exploring their options, the Matthews set up a $250,000 lead trust with Youth Services. The trust will pay Youth Services 7% (approximately $17,500) each year for 20 years, after which their children will receive the trust principal.

Only $63,700 of the $250,000 transferred to the trust is considered a taxable gift to their children (this may be applied to the Matthews' unified tax credit). The trust is expected to grow to about $420,000 during its 20-year term. The trust's appreciation and the principal will pass to the Matthews' children at a reduced gift tax rate and completely free of estate tax.

Over the 20-year term, Youth Services will receive about $470,000 from the trust, which will help to ensure the future of substance abuse counseling at Youth Services. (This is just one example of how such donations help support the agency's programs.)

Contact our Development Director ysdev@sover.net to find out how you would benefit from establishing a charitable lead trust.

{Back to Charitable Lead Trusts}