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.
Kansas Charitable Lead Inter Vivos Unit rust is a type of estate planning tool that allows individuals in Kansas to make charitable contributions while also retaining some benefits for themselves or their beneficiaries. This charitable trust arrangement combines the features of a charitable lead trust (CLT) and a unit rust. It provides an opportunity for philanthropic individuals to support their preferred charitable organizations or causes while potentially reducing their taxable income. In a Kansas Charitable Lead Inter Vivos Unit rust, the trust creator (also known as the granter or settler) transfers assets, such as cash or property, into the trust. The trust then distributes a percentage of the trust's assets or a fixed amount to one or more charitable organizations each year for a specific period. This period is usually defined in the trust agreement. There are two main types of Kansas Charitable Lead Inter Vivos Unit rusts: 1. Kansas Charitable Lead Annuity Unit rust: In this type of unit rust, the annual distribution to the charitable organization(s) is a fixed annuity amount predetermined at the time of creating the trust. The charitable organization(s) will receive the same amount each year regardless of the trust's performance. 2. Kansas Charitable Lead Net Income Unit rust: This type of unit rust allows for distributions to be based on a fixed percentage of the trust's net income each year. The granter or trustee has the option to annually determine the distribution amount based on the trust's performance, ensuring flexibility in the distribution to the charitable organization(s). However, a minimum amount is still required to be distributed each year. It is essential to consult with an experienced estate planning attorney or financial advisor when considering establishing a Kansas Charitable Lead Inter Vivos Unit rust. They can provide personalized guidance based on an individual's specific financial goals, assets, and philanthropic objectives. Additionally, anyone interested in setting up this trust should carefully consider the tax implications and legal requirements associated with charitable trusts in Kansas.
