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Charitable Lead Trusts Offer You Options
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You can benefit from the tax savings that result from supporting Bates without giving up the assets that you'd like your family to receive someday with a gift in the form of a charitable lead trust.
There are two ways that charitable lead trusts make payments to Bates:
A charitable lead annuity trust pays a fixed amount each year to Bates and is more attractive when interest rates are low.
A charitable lead unitrust pays a variable amount each year based on the value of the assets in the trust. With a unitrust, if the trust assets go up in value, for example, the payments to Bates go up as well.
How It Works
George would like to support Bates and provide for his children. Following his advisor's recommendation, George funds a charitable lead annuity trust with assets valued at $2,500,000.
George's trust pays $175,000 (7 percent of the initial fair market value) to Bates each year for 15 years, which will total $2,625,000. After that, the balance in the trust goes to his children. Assuming a 6 percent investment return, the children will receive approximately $1,918,101.
His gift tax deduction is $2,182,775* against the $2,500,000 of assets. Therefore, only the difference ($317,225) is subject to gift tax, which is offset against his lifetime gift tax exclusion. After that, the remaining trust assets and all of their growth will pass to his family at zero additional cost in gift and estate taxes. Had George given the $2,500,000 outright to his children, it would have been a taxable gift.
*Assuming annual payments and a 2.4 percent charitable midterm federal rate.
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Not Sure How to Begin Planning?
- Contact the Office of Gift Planning at (207) 786-6246 or Toll-free: (800) 762-3145 or firstname.lastname@example.org to talk about supporting Bates by setting up a charitable lead trust.
- Seek the advice of your financial or legal advisor.
- If you include Bates in your plans, please use our legal name and federal tax ID.
Legal Name: President and Trustees of Bates College
Address: 2 Andrews Road, Lewiston, ME 04240
Federal Tax ID Number: #01-0211781
The information on this website is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in examples are for hypothetical purposes only and are subject to change. References to estate and income taxes include federal taxes only. State income/estate taxes or state law may impact your results. Annuities are subject to regulation by the State of California. Payments under such agreements, however, are not protected or otherwise guaranteed by any government agency or the California Life and Health Insurance Guarantee Association. A charitable gift annuity is not regulated by the Oklahoma Insurance Department and is not protected by a guaranty association affiliated with the Oklahoma Insurance Department. Charitable gift annuities are not regulated by and are not under the jurisdiction of the South Dakota Division of Insurance.