When people think about providing an inheritance to children and making a significant charitable gift through their estates, a vehicle known as the "charitable lead trust" is an excellent method to accomplish both objectives.
A charitable lead trust is a trust that the estate owner establishes either during life (an inter vivos trust) or at death (a testamentary trust). The income from the trust flows to a charitable organization, like the Society, typically for a stated number of years. After that period, the assets inside the trust are then distributed. The fact that the assets will one day be transferred to another person means that this trust has one further distinction: it is a "nongrantor" trust, as opposed to a “grantor” trust. "Nongrantor" means the trust assets are not owned by the person who established the trust, and the assets are not going to be returned to him or her someday. (A "grantor" trust is one in which the assets will eventually be distributed back to the donor. As a result, the donor is subject to tax on the assets.)
This is an outstanding way to transfer property to family members down the line (e.g., children and grandchildren) at a minimal tax cost, especially if you're able to forgo investment income on some assets.
By funding a charitable lead trust now, you may be able to exclude the trust income from your gross income and future appreciation from your estate. You will obtain a gift tax deduction for the present value of the income interest given to us. If you create a lead trust by will, an estate tax charitable deduction will be allowed for the present value of the income interest bequeathed to the Society.
A lead trust is particularly gratifying because your benevolence makes it possible for us to fulfill our pressing needs much sooner, in comparison to a charitable remainder trust. To find out if a lead trust is right for you, contact Karen.Barton@nmss.org at 760-448-8412.
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