In a charitable lead trust, a donor transfers property to the lead trust, which pays a percentage of the value of the trust assets, usually for a term of years, to the charity. At the end of the trust term, the remaining assets in the trust and any growth it has realized are passed to donor's heirs. Although there is no income tax deduction when the donor creates a charitable lead trust, his/her gift or estate tax is greatly discounted and any growth is passed to his/her heirs gift and estate tax free.
In a charitable lead unitrust, a donor irrevocably transfers cash, closely held securities or other valuable property to a trustee who, during the unitrusts term, invests the unitrust's assets. Each year, the trustee distributes a fixed percentage of the unitrust's net asset value, as calculated annually, to a named charity. These payments are made out of trust income (or trust principal if the trust income is not adequate) and are tax deductible as a charitable contribution for the year in which they are made. If, however, trust income exceeds the charitable payment for a given year, the trust pays income tax on the excess.
When the lead unitrust term ends, the unitrust distributes the remainder of its accumulated assets to a non-charitable remainderman, usually family members or other beneficiaries named by the donor. That amount is subject to federal gift tax based on the current fair market value of the gift at the time the trust is established. Gift tax is paid on the remainder interest as calculated from the current fair market value of the asset at the time the trust is established; generally this amount is much less than the estate tax would be on the asset as calculated at the time it is inherited.
The Florida Charitable Lead Inter Vivos Unit rust is a legal entity or charitable trust established within the state of Florida. It is structured to benefit both charitable organizations and individuals looking to make philanthropic contributions while receiving tax benefits. This type of trust functions by designating a specific period of time or duration during which the trust's income or a fixed percentage of its fair market value goes directly to one or more charitable organizations. After the designated period ends, the remaining assets or property are transferred back to the granter or other named beneficiaries. The Florida Charitable Lead Inter Vivos Unit rust offers several benefits for individuals and organizations alike. For individuals, it allows them to support their chosen charitable causes during their lifetime, ensuring that the designated charity receives financial assistance during a specific period. Concurrently, the granter or other beneficiaries can also receive substantial tax deductions during the period in which the trust provides income to the charitable organizations. Furthermore, this type of charitable trust provides flexibility for granters, as they can determine the duration, beneficiaries, and terms of the trust. Florida Charitable Lead Inter Vivos Unit rusts can be established either as fixed annuity trusts or as a percentage-of-value unit rust. Fixed annuity trusts provide a fixed annual payment to the designated charitable organization(s) for the predetermined duration set by the granter. This ensures a consistent income stream for the charity while allowing the granter to plan their contributions effectively. In contrast, a percentage-of-value unit rust allocates a fixed percentage of the fair market value of the trust's assets to the charitable organization(s) annually. This structure allows for flexibility in terms of trust assets, as its value can grow or decline over time. Overall, the Florida Charitable Lead Inter Vivos Unit rust serves as an effective vehicle for individuals to support charitable causes while also benefiting from relevant tax deductions. Granters have the ability to customize the trust to fit their personal preferences and philanthropic goals. By establishing either a fixed annuity trust or a percentage-of-value unit rust, individuals can contribute to the betterment of their community and drive positive change in accordance with their values.
